There Ain’t No Such Thing As A Free Subsidy

by Don Boudreaux on August 14, 2009

in Seen and Unseen, Trade

An argument that protectionists — both the greedy variety and the uninformed variety — frequently raise goes like this:

Foreign governments often subsidize or otherwise give special advantages to their domestic firms, especially to their domestic firms that produce for export.  It’s unfair for our firms to compete against artificially advantaged foreign rivals.  So when such subsidizing and protecting by a foreign government is detected, our own government should respond in kind — or at least by protecting our domestic firms from having to compete against these artificially advantaged firms.

A full book would be required to unpack all of the many errors that infect the above reasoning.  I here, though, focus on only one of these errors, namely, the fact that there is no such thing as a free subsidy.  Resources used to subsidize industry A (or industries A, B, and C) must come from somewhere; such subsidies might enable their recipient industries to expand output farther than otherwise and to sell at lower prices than otherwise, but these same subsidies will artificially raise the costs born by other industries in the country.

Dwight Lee and I wrote about this error, in October 2003 at Tech Central Station, in an article entitled “Trade Grade.”  Now I expand the argument a bit.

Imagine the Carpenter family.  Headed by Mr. “Ruler” Carpenter, a determined patriarch, the Carpenters have four teenage sons: Abe, Bill, Carl, and Dave.  Abe is the only one of the boys who wants to follow the family tradition by becoming a carpenter but, well, he’s not very good at it.  He’s awkward swinging a hammer, and has already cut off a couple of his fingers while using a radial-arm saw.

Bill, Carl, and Dave want to become chefs.  And each has a great deal of natural talent in the kitchen.

“Ruler” knows that he can’t force Bill, Carl, and Dave to become carpenters.  But he is determined to do all that he can to ensure that Abe earns a living at carpentry.  So “Ruler” announces to his sons that he will not pay for Bill, Carl, and Dave to go to cooking school and he will take all the money that he’d set aside for their college education and devote it to Abe’s carpentry career.

With these funds, “Ruler” hires several skilled helpers to assist Abe in his work – helpers who enable the work of “Abe’s Carpentry” to be quite passable.  “Ruler” also promises to supplement Abe’s income with a $20,000 gift each year, knowing that Abe, even with his helpers, is unlikely to survive on carpentry alone.

With these subsidies from “Ruler,” Abe might well be able to work and compete as a carpenter.

But the welfare of the entire Carpenter family is surely reduced.  Because of these subsidies to Abe, “Ruler” and his wife have less money to save for their retirement and for other family matters.  Importantly, brothers Bill, Carl, and Dave have fewer resources with which to pursue their dreams of becoming chefs; they are hindered at developing skills that would make each one of them as productive (and, hence, as prosperous) as possible.

“Ruler” surely does his family no favors by subsidizing Abe’s carpentry career, and he likely also makes life more difficult for other, competing carpenters.  But “Ruler’s” subsidies to Abe, do note, also make life for chefs — ones against whom Bill, Carl, and Dave would otherwise have competed — easier than otherwise.

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{ 161 comments }

Anonymous August 14, 2009 at 2:28 pm

simple and succinct. beautiful :)

Anonymous August 14, 2009 at 3:06 pm
Anonymous August 14, 2009 at 6:57 pm

Thanks!!

Yet Another Methinks August 14, 2009 at 11:53 pm


awkward swinging a hammer, and has already cut off a couple of his fingers while using a radial-arm saw.

Thanks also for helping me to better understand my dentista.

John August 14, 2009 at 3:21 pm

That’s a pretty unassailable argument. A leftist would respond that tariffs, instead of subsidy, would solve the redistribution problem, but we know that the resultant higher prices would have a similar effect on the public at large.

An Obama leftist would respond that your argument wrongly assumes that money is a scarce resource.

Anonymous August 14, 2009 at 6:17 pm

You assume the left wants to grow the economic pie. No they don’t care how big it is, as long as it’s “equitably distributed”. That is their highest morality. Communism.

Daniel Kuehn August 14, 2009 at 6:43 pm

Fighting communism with a distorted picture of it’s goals doesn’t really help the fight against communism.

Anonymous August 14, 2009 at 6:47 pm

Equal distribution of income is not a main goal of Communism?

Daniel Kuehn August 14, 2009 at 6:52 pm

Certainly it is. But since when has having equal distribution as a goal jettisoned growth as a goal as well. I’m taking issue with the “they don’t care how big it is” line.

Granted – they’re not exactly pursuing the right end to grow it… but they can trick themselves into thinking they are for a couple of decades if they’re introducing communism to a peasant economy.

Anonymous August 15, 2009 at 5:11 pm

How so, Disingenuous Kuehn?

What do you know about fighting?

Are you talking about an intellectual battle?

Are you talking about actually killing communists until they are all gone?

What do you know about fighting communism, what is your perspective? From where you sit in the middle of the road that is socialism, and runs directly through the heart of the socialist church, tell us how knowing the thief’s goals helps us fight him off more effectively than just knowing he wants to steal from us?

You know as well as I do that no communist/socialist has ever admitted defeat in an intellectual battle, they run from intellect, rationality, reason, and individual exercise thereof; and, make every attempt to turn the debate into an emotional issue, where “feelings” substitute for thinking.

So being an absolute master at the knowledge of communism’s goals is no factor in a fight with communists.

Anonymous August 15, 2009 at 5:16 pm

But it does help to “know your enemy”.

Anonymous August 14, 2009 at 4:22 pm

The one argument I can quickly think for subsidy goes like this:
Suppose that there’s a rival family, similarly with a ruler, say “Boss”, and son that I’ll call Bob. Bob is also a carpenter, but unlike Abe, is actually good at what he does. Even though Bob offers a much superior service, Abe (with his subsidies) is able to lower his prices to point that anyone would be fool to go to Bob. Soon Bob is driven out of business, and becomes a electrician, something that he can make a living at, but is no where near as good at as a carpenter. At this point, with Abe being the sole carpenter, “Ruler” is then able to stop his subsidies, prices rise, and people are paying Bob prices for Abe service. In this situation, does it make sense for “Boss” to subsidize Bob in order to keep him afloat, although hurting the rest of Bob’s family? Or but more bluntly, is it worth it to use subsidies to prevent monopolies despite their costs?

Note: I’m not making at comparison that any current subsidies are doing this, it’s just a hypothetical situation.

JamesFromPittsburgh August 14, 2009 at 4:43 pm

totter,

When Abe starts charging Bob prices couldn’t Bob simply get back in the carpentry game? At that point he’s charging the same price for a superior service.

Although (and I do realize your example is just a hypothetical), I don’t see how Abe’s prices could ever be low enough to the point where someone is a “fool” to go to Bob. Plenty of high-end goods and service compete with low cost, low quality goods and services. Think bottled water. It costs, in some cases, hundreds of times more than, say, tap water. It’s still a rather lucrative business.

Anonymous August 15, 2009 at 5:43 am

“is it worth it to use subsidies to prevent monopolies despite their costs?”

No.

Free market monopolies are just as regulated by the price mechanism as anything else. If they raise prices, it encourages competitors in the same way as if there were not a monopoly. If you prevent them from raising prices, you are hindering the development of competition. If you subsidize the competition, you are promoting inefficiency and higher costs–so by subsidizing the competition, you are having the opposite effect that free competition usually has.

In other words, coercive interference with a free market monopoly IS anticompetitive.

A monopoly without coercive powers or protection by coercive powers is still disciplined by the price mechanism and is neither good nor bad. Interfering with the price mechanism because of a monopoly has the same bad consequences as doing so without one.

If I read Hayek correctly, he disagrees with this, for which I am much disappointed.

Sam Grove August 16, 2009 at 3:44 am

The actual history of the rare free market monopoly is that they do not behave according to popular monopoly theories. Alcola Aluminum is an example.

As you say, they are disciplined by the price mechanism and the possibility of competition.

Anything the government does is anti-competitive by nature.

Daniel Kuehn August 14, 2009 at 5:43 pm

Ugh… I hate making specific points on trade arguments because I am a free trader and I know I’m going to be accused of not being one. I’ll start easy – Don’s illustration is obviously true. To the extent that we engage in either subsidies or tariffs, it’s going to create relative winners and losers. Anyone who wants to meddle in trade policy oughta just plain come clean about that.

I’d push back a LITTLE bit on the idea that there’s a total welfare loss by referencing some of what’s been called “new trade theory”… I cringe again to mention it here, because that’s what Krugman got his Nobel Prize for (not for his NY Times columns, believe it or not!). Some industries are characterized by both substantial increasing returns to scale and multiple equilibria, and if these are relatively new industries it’s very easy to get caught at a sub-optimal equilibrium. If you’re redistributing from industries that are operating at constant/decreasing returns to capacity to an industry operating at a sub-optimal capacity where there are increasing returns, there doesn’t have to be a total welfare loss. Redistribute the gains a la Edgeworth, and you’re better off for it. Often, if an industry obviously exhibits increasing returns you don’t really need a kick in the pants from the state (Silicon Valley, for example… although I don’t know… maybe they had a lot of DARPA money? I don’t know the history there), but sometimes it’s useful (Korean ship building, for example).

Anyway – I want to make clear that’s not a case for a protectionist mindset. The mindset is very bad and very dangerous. Just think of it as a case for why there doesn’t have to be a loss in total welfare from protectionism (hopefully we’re all able to differentiate thinking about the effects of a policy from advocating a policy).

And if I got some of New Trade Theory wrong, please google amply – there’s a lot of good material out there on it. Doesn’t hurt to read someone you disagree with.

Anonymous August 14, 2009 at 6:12 pm

The main problem with Krugman is he’s a partisan hack. He spends 99% of his time bashing Republicans and the other 1% discussing actual economics.

sandre August 14, 2009 at 6:51 pm

That 1% is grossly exaggerated.

Anonymous August 15, 2009 at 5:19 pm

I was just trying to be generous with the hack.

James August 14, 2009 at 7:55 pm

So, it seems to me that one of the problems with theories like Krugman is assuming that government gets it right. For every nascent industry they protect that actually turns into something that’s a net positive for society, how many times will they pick incorrectly and not only hurt what already exists, but waste the resources that went into protecting that failed industry?

Sure, Krugman’s theory would work 100% in hindsight, but that doesn’t help at all.

Daniel Kuehn August 14, 2009 at 9:02 pm

Well let’s separate the theory from the policy recommendation.

There’s nothing wrong with Krugman’s theory. And since he hasn’t been going around advocating errecting tariffs since then (with the exception of his “carbon tariff” which is really a tax, not a tariff in the protectionist sense at all), he clearly had the proper response to his own theory: a good description of the way trade works, but not a reason to go protectionist.

Daniel Kuehn August 14, 2009 at 5:49 pm

Wow! – just saw the other posts. You’re on a trade rampage!

Awesome – I just want to reemphasize I’m not making a Meyerson-esque argument in favor of protectionism. I’m just making a “protectionism is always bad, but in some cases it is less total welfare reducing than others” argument. Keep up the good work!

Anonymous August 14, 2009 at 6:06 pm

“Resources used to subsidize industry A (or industries A, B, and C) must come from somewhere;… ”
DB

And yet the facts will show China, which subsidzes its industries is growing while our country is sinking deeper into debt and economic despair.

Don we have been doing everything you guys say to do from gashing regulations to signing free trade agreements and cutting taxes over the last 30 years and things are looking pretty grim.

So you are right the resources that China uses to subsidize industry MUST COME FROM SOMEWHERE… and they are coming straight from the hide of OUR economy from the massive trade imbalance that has played a big part in destroying our economy and transfering massive amounts of wealth from productive workers to non-productive traders of labor and finance.

And here we are and you’re making an argument for even more of the same. Don’t the real world facts matter to you guys?

Anonymous August 14, 2009 at 6:12 pm

Muirgeo,

If you knew the slightest thing about trade, you’d understand that whenever America’s trade deficit with China rises, it does so because the Chinese are investing in America — investing in dollar-denominated assets — and emphatically NOT because they are investing in, or subsidizing, Chinese producers in China.

You’re free to have, and to express, your opinions. But please don’t waste our time with arguments that are factually impossible.

Anonymous August 14, 2009 at 6:16 pm

Can’t you just ban the troll? Doesn’t the new web site tools allow you to do that? Believe me, everyone here wants him gone.

Anonymous August 14, 2009 at 6:20 pm

Yes, we could ban anyone we wish, but we don’t wish to do so. As long as Muirgeo remains civil, he will not be banned. (The same, of course, goes for every patron of the Cafe.) Incivility and vulgarity are bannable offenses. Being woefully uninformed is not.

Anonymous August 14, 2009 at 6:49 pm

So is previous incivility doesn’t matter? We have to endure his lies and distortions just because? It makes Cafe Hayek a very unpleasant experience.

John Dewey August 14, 2009 at 6:57 pm

If everyone truly wanted muirgeo gone, they would simply ignore muirgeo. As soon as muirgeo gets a response, he has achieved what seems to be his goal: attention.

I’m not so sure everyone wants muirgeo gone. Some commentors seem to expend much mental energy arguing with him.

Anonymous August 14, 2009 at 9:14 pm

My goal isn’t attention. It’s thoughtful honest debate.

It’s a fair point I made that opening up to “free” trade, cutting regulations and slashing taxes on high income earners has been followed by th economic collapse we see around us.

There are many good economist who disagree with Don on trade and the significance of the imbalance on our economy so me bringing up the point has nothing to do with trolling.

It’s a legitimate topic of debate.

sandre August 14, 2009 at 9:37 pm

Don’t be tempted to wrestle with this muirpig. You both get dirty and the pig will enjoy it immensely. A pig is not capable of being thoughtful.

Anonymous August 15, 2009 at 4:16 am

Believe me, everyone here wants him gone.

I don’t. This is the only subject that ever comes up that puts me on the same side with Yasafi. If everyone really wanted him banned, then Gil would be the only one commenting on his posts.

Especially now that names precede the comment, it’s easy to skip past those you don’t want to read.

Yasafi is dumb as a post, but I like the fact that the Cafe isn’t like the Kos and will tolerate dissent. Even from a moron.

sandre August 14, 2009 at 6:39 pm

Muirgeo is a complete waste of time. Has he said anything in this recent comment of his, that he didn’t say 3-4 years ago, that too a zillion times. See how he went from trade to income inequality.

I have asked him several times to provide data on the net reduction in regulations by the number of pages eliminated from the federal master set of books. Doesn’t fact matter to him at all?

That chart he linked shows that there was no income disparity before the inception of Fed ( government take over of monetary policy ) and before the inception of income tax. Income inequality was less before the great society programs than after it.

If trade is really free, then why is government signing “Free trade” agreements?

He keeps repeating that Hoover did nothing. Where as government, in most prior recessions, have cut spending. First hoover budget was 10% over the Coolidge budget of 1930( which was halfway through when hoover tookover in March 1929). from 3.3 billion to 3.6 billion. Then he increased spending by 40% again next year to 4.7 billion, another 30% increase ( revenues were only 1.9 billion that year ), even putting Barack Obama to shame. Next year increased it to 6.5 billion another 40% or so increase. Do you know how much Roosevelt increased his spending next year ? it was negative, to 6.4 billion ( and that supposedly solved the crisis ). Does fact matter to him at all?

If such great increases in budget outlays are not enough, then what about the cut from about 95billion federal budget to under 30 billion, immediately after the war? What kind of depression should that have caused? Especially, considering the fact that government was essentially the economy during the war. Why didn’t it devastate the economy as hyper Keynesian Samuelson predicted?

Daniel Kuehn August 14, 2009 at 6:54 pm

Did you see my response to you on the “Dam” post on your question about Samuelson. It’s true he and many other were wrong – it happens to the best of us. But the reasons for why he was wrong hardly refute Keynesianism (they don’t prove it, granted – but they are entirely consistent with it).

sandre August 14, 2009 at 8:21 pm

why don’t you provide a link to that comment?

Anonymous August 14, 2009 at 9:56 pm

And how does China investing in America help us? Your position seems like saying isn’t it great that I owe the bank so much money because they will now invest themselves in all my assets. I don’t get what’s good about that.

What it keeps interest rates low so we can have a housing boom?

That worked out well.

Or is the fact that they own so much of our treasuries some how a good thing? China is, in effect, loaning the U.S. money to buy its products. At some point WE need to make something or all those treasuries will be cashed in to our detriment.

And again you don’t explain why are economy is in the tank after we’ve cut regulations, taxes and signed every free trade agreement we could. Don’t you find the real world results just a little curious?

Sam Grove August 14, 2009 at 6:39 pm

and they are coming straight from the hide of OUR economy

No, such subsidies are a boon to us at a cost to Chinese people.

You may not have learned yet that jobs are a cost of consumption, not a benefit.

Anonymous August 15, 2009 at 2:05 pm

So that explains why their economy is booming and our is busting?????

Sam Grove August 15, 2009 at 3:46 pm

How booming is the China economy? Will it be booming in a few years?

IAC, China has been spending relatively little on environmental quality (compared to the U.S.), does not have a worldwide empire to maintain, and it not as far along on the demographic curve as the U.S.

Point being that there are so many factors involved, that neither you nor I can show, with much certainty, why one economy seems to be doing well relative to another.

Most Chinese are still quite poor.

Anonymous August 14, 2009 at 6:10 pm

Another example of how people’s economic sophistry usually comes down to an incomplete accounting of costs.

The ethical defense is much more clear cut than the economic one–whatever a foreign government does that may or may not harm a domestic industry, IT IS NOT MY PROBLEM, and my government has no moral right to punish me for it.

But for the unethical, your economic argument provides a fatal blow.

Anonymous August 14, 2009 at 7:40 pm

Don we have been doing everything you guys say to do from gashing regulations to signing free trade agreements and cutting taxes over the last 30 years and things are looking pretty grim.

No one living on planet Earth — who took 5 minutes to examine the evidence — would ever make the above statement.

Let‘s start with your first claim: “Gashing regulations”? Utter nonsense. The last thirty years has seen an enormous outpouring of new regulations that throttle, control, impede and strangle business in the U.S.

For instance, let me just list some of the new regulations issued over the last 30 years — just the one‘s I can think of off the top of my head:

1) The passing of the Occupational Safety and Health Act, and its enforcement by a new federal bureaucracy called OSHA — complete with the unleashing of swarms of OSHA inspectors authorized to inspect your business at any time and close you down if you make them unhappy.

There are tens of thousands of pages of OSHA regulations.

2) The passing of federal Hazardous Materials Handling legislation — also enforced by OSHA — requiring vast amounts of new paperwork and procedures governing the handling and shipping of everything from batteries to light bulbs.

3) The passing of additional state workman’s compensation laws and the erection of state bureaucracies for administering those laws.

4) The creation of additional state laws forcing businesses to fund unemployment compensation insurance and the creation of state bureaucracies to administer these laws.

5) The passing of the Equal Employment Opportunity Act and the creation of the federal bureaucracy, the EEOC, that forces compliance with the act. Under this act, extensive documentation of hiring practices must be maintained to prove one’s innocence if one is accused of any sort of discrimination. Under this law, a businessman is denied the same legal rights granted to anyone else accused of a crime. A businessman accused of discrimination is presumed guilty, is required to prove his innocence to a government bureaucrat, is not protected by ANY rules of evidence (the bureaucrat is free to give whatever weight he wishes to whatever he considers evidence), does NOT have a right to council, does not have a right to a trial by a jury of his peers and does NOT have any right of appeal.

There are tens of thousands of pages of EEOC regulations and rules.

6) The passing of the Pregnancy Discrimination Act which requires the following:

An employer cannot refuse to hire someone because she is pregnant or has a pregnancy-related condition.

An employer can’t require a pregnant women to submit to special procedures in order to determine whether she can perform her job duties unless the employer requires all employees to submit to those procedures.

An employer must treat a pregnant woman who can’t perform her job due to a medical condition related to her pregnancy the same way he treats all temporarily disabled employees.

An employer may not keep a pregnant woman from working or prohibit a woman from returning to work after giving birth.

Any employer-provided health insurance plan must treat pregnancy-related conditions the same as other medical conditions.

Pregnant employees cannot pay a larger health insurance deductible than other employees pay.

7) The passing of the Health Insurance Portability and Accountability Act (HIPAA) which requires the following:

Under HIPAA you cannot be denied group health insurance because of any health factors.
.
If you have at least 12 months of continuous creditable coverage, a group health plan can’t apply preexisting condition exclusions to your coverage.

One employee can’t be required to pay higher premiums than other similarly-situated employees. Similarly situated employees are those in the same employment category.

8) The passing of the Americans with Disabilities Act, which requires extensive paperwork and procedures to prove that one has made a “reasonable effort” to accommodate anyone who claims any of some 40 “disabilities” that have now been recognized under the act. For instance, alcoholism is now a “ disability” that an employer must somehow “accommodate”.

9) The passing of “COBRA” regulations governing what businesses must do so that an employee can keep their group health insurance if they lose their jobs.

10) The passing of the Family Medical Leave Act which forces a business to grant leave to an employee — and guarantee them their job back — if any one of numerous “family problems” develops.

11) The FDA’s creation of the “Good Manufacturing Practices” added many tens of thousands of pages of new regulations governing the manufacture of medical products and devices. The “GMPs” also authorized another swarm of government inspectors who can descend on your business at any time to see if you are in compliance with any of these thousands of new rules.

Take a look at just the table of contents for these “GMPs”:

Bar Code Label Requirements–Questions and Answers
Comparability Protocols – Protein Drug Products and Biological Products – Chemistry, Manufacturing, and Controls Information
Compressed Medical Gases
Computerized Systems Used in Clinical Investigations
Current Good Manufacturing Practice for Combination Products
Current Good Manufacturing Practice for Medical Gases
Current Good Manufacturing Practice for Phase 1 Investigational Drugs
Expiration Dating and Stability Testing of Solid Oral Dosage Form Drugs Containing Iron
Expiration Dating of Unit-Dose Repackaged Drugs: Compliance Policy Guide Formal Dispute Resolution: Scientific and Technical Issues Related to Pharmaceutical CGMP General Principles of Process Validation
Good Laboratory Practice Regulations Questions and Answers
Guidance for Hospitals, Nursing Homes, and Other Health Care Facilities – FDA Public Health Advisory
Guidance for IRBs, Clinical Investigators, and Sponsors: Exception from Informed Consent Requirements for Emergency Research (21 CFR 50.24)
Guideline for Validation of Limulus Amebocyte Lysate Test as an End-Product Endotoxin Test for Human and Animal Parenteral Drugs, Biological Products, and Medical Devices
Investigating Out-of-Specification Test Results for Pharmaceutical Production Manufacturing, Processing, or Holding Active Pharmaceutical Ingredients Marketed Unapproved Drugs — Compliance Policy
Monitoring of Clinical Investigations
Nuclear Pharmacy Guideline Criteria for Determining When to Register as a Drug Establishment
Part 11, Electronic Records; Electronic Signatures — Scope and Application
PAT — A Framework for Innovative Pharmaceutical Development, Manufacturing, and Quality Assurance
PET Drug Products – Current Good Manufacturing Practice (CGMP)
Pharmaceutical Components at Risk for Melamine Contamination
Pharmacy Compounding — Compliance Policy Guide
Possible Dioxin/PCB Contamination of Drug and Biological Products
Powder Blends and Finished Dosage Units — Stratified In-Process Dosage Unit Sampling and Assessment
Revised Attachments
Preparation of Investigational New Drug Products (Human and Animal) Final 11/1992
Prescription Drug Marketing Act — Donation of Prescription Drug Samples to Free Clinics
Prescription Drug Marketing Act (PDMA) Requirements- Questions and Answers Process Validation: General Principles and Practices Quality Systems Approach to Pharmaceutical Current Good Manufacturing Practice Regulations
Questions and Answers on Current Good Manufacturing Practices (cGMP) for Drugs
Review of FDA’s Implementation of the Drug Export Amendments Sterile Drug Products Produced by Aseptic Processing — Current Good Manufacturing Practice
Street Drug Alternatives
Testing of Glycerin for Diethylene Glycol
The Use of Mechanical Calibration of Dissolution Apparatus 1 and 2 – Good Manufacturing Practice (CGMP)

12) The Clean Air Act Amendments mandated billions of dollars in new pollution controls and have put thousands of small businesses out of business with their insane costs.

The legislation is 645 pages long. Take a gander at the table of contents listing for these regulations:

TITLE I – AIR POLLUTION PREVENTION AND CONTROL
Part A – Air Quality and Emission Limitations
Sec. 101. Findings and purposes.
Sec. 102. Cooperative activities and uniform laws.
Sec. 103. Research, investigation, training, and other activities.
Sec. 104. Research relating to fuels and vehicles.
Sec. 105. Grants for support of air pollution planning and control programs.
Sec. 106. Interstate air quality agencies or commissions.
Sec. 107. Air quality control regions.
Sec. 108. Air quality criteria and control techniques.
Sec. 109. National ambient air quality standards.
Sec. 110. Implementation plans.
Sec. 111. Standards of performance for new stationary sources.
Sec. 112. National emission standards for hazardous air pollutants.
Sec. 113. Federal Enforcement.
Sec. 114. Inspections, monitoring, and entry.
Sec. 115. International air pollution.
Sec. 116. Retention of state authority.
Sec. 117. President’s air quality advisory board and advisory committees.
Sec. 118. Control of pollution from federal facilities.
Sec. 119. Primary nonferrous smelter orders.
Sec. 120. Noncompliance penalty.
Sec. 121. Consultation.
Sec. 122. Listing of certain unregulated pollutants.
Sec. 123. Stack heights.
Sec. 124. Assurance of adequacy of state plans.
Sec. 125. Measures to prevent economic disruption or unemployment.
Sec. 126. Interstate pollution abatement.
Sec. 127. Public notification.
Sec. 128. State boards.
Sec. 129. Solid Waste Combustion.
Sec. 130. Emission Factors.
Sec. 131. Land Use Authority.

Part B – Ozone Protection
The 1990 CAA Amendments replaced Part B with Title VI – Stratospheric Ozone Protection , which follows later on this page. The following sections of Part B were replaced:

Sec. 150. Purposes.
Sec. 151. Findings and definitions.
Sec. 152. Definitions.
Sec. 153. Studies by environmental protection agency.
Sec. 154. Research and monitoring by other agencies.
Sec. 155. Progress of regulation.
Sec. 156. International cooperation.
Sec. 157. Regulations.
Sec. 158. Other provisions unaffected.
Sec. 159. State authority.

Part C – Prevention of Significant Deterioration of Air Quality
SUBPART 1 – Clean Air
Sec. 160. Purposes.
Sec. 161. Plan requirements.
Sec. 162. Initial classifications.
Sec. 163. Increments and ceilings.
Sec. 164. Area redesignation.
Sec. 165. Preconstruction requirements.
Sec. 166. Other pollutants.
Sec. 167. Enforcement.
Sec. 168. Period before plan approval.
Sec. 169. Definitions.

SUBPART 2 – Visibility Protection
Sec. 169a. Visibility protection for federal class I areas.
Sec. 169b. Visibility

Part D – Plan Requirements for Nonattainment Areas
SUBPART 1 – Nonattainment Areas in General
Sec. 171. Definitions.
Sec. 172. Nonattainment plan provisions.
Sec. 173. Permit requirements.
Sec. 174. Planning procedures.
Sec. 175. Environmental protection agency grants.
Sec. 176. Limitation on certain federal assistance.
Sec. 176A. Interstate Transport Commissions.
Sec. 177. New motor vehicle emission standards in nonattainment areas.
Sec. 178. Guidance documents.
Sec. 179. Sanctions and consequences of failure to attain
Sec. 179B. International border areas

SUBPART 2 – Additional Provisions for Ozone Nonattainment Areas
Sec. 181. Classifications and attainment dates.
Sec. 182. Plan submissions and requirements.
Sec. 183. Federal ozone measures.
Sec. 184. Control of interstate ozone air pollution.
Sec. 185. Enforcement for Severe and Extreme ozone nonattainment areas for failure to attain.
Sec. 185A. Transitional areas.
Sec. 185B. NOx and VOC study.

SUBPART 3 – Additional Provisions for carbon monoxide nonattainment areas
Sec. 186. Classification and attainment dates.
Sec. 187. Plan submissions and requirements.

SUBPART 4 – Additional Provisions for particulate matter nonattainment areas
Sec. 188. Classification and attainment dates.
Sec. 189. Plan provisions and schedules for plan submissions.
Sec. 190. Issuance of RACM and BACM guidance.

SUBPART 5 – Additional provisions for designated nonattainment for sulfur oxides, nitrogen dioxide, or lead
Sec. 191. Plan submission deadlines.
Sec. 192. Attainment dates.

SUBPART 6 – Savings provisions
Sec. 193. General savings clause.

TITLE II – EMISSION STANDARDS FOR MOVING SOURCES
Sec. 201. Short title.

Part A – Motor Vehicle Emission and Fuel Standards
Sec. 202. Establishment of standards.
Sec. 203. Prohibited acts.
Sec. 204. Injunction proceedings.
Sec. 205. Penalties.
Sec. 206. Motor vehicle and motor vehicle engine compliance testing and certification.
Sec. 207. Compliance by vehicles and engines in actual use.
Sec. 208. Records and reports.
Sec. 209. State standards.
Sec. 210. State grants.
Sec. 211. Regulation of fuels.
Sec. 212. Development of low-emission vehicles.
Sec. 213. Fuel economy improvement from new motor vehicles.
Sec. 214. Study of particulate emissions from motor vehicles.
Sec. 215. High altitude performance adjustments.
Sec. 216. Definitions for part A.
Sec. 217. Motor vehicle compliance program fees.
Sec. 218. Prohibition on production of engines requiring leaded gasoline.
Sec. 219. Urban bus standards.

Part B – Aircraft Emission Standards
Sec. 231. Establishment of standards.
Sec. 232. Enforcement of standards.
Sec. 233. State standards and controls.
Sec. 234. Definitions.

Part C – Clean Fuel Vehicles
Sec. 241. Definitions.
Sec. 242. Requirements Applicable to clean fuel vehicles.
Sec. 243. Standards for light-duty clean fuel vehicles.
Sec. 244. Administration and enforcement as per California standards.
Sec. 245. Standards for heavy-duty clean-fuel vehicles(GVWR above 8,500 up to 26,000 lbs).
Sec. 246. Centrally fueled fleets.
Sec. 247. Vehicle conversions.
Sec. 248. Federal agency fleets.
Sec. 249. California pilot test program.
Sec. 250. General provisions.

TITLE III – GENERAL
Sec. 301. Administration.
Sec. 302. Definitions.
Sec. 303. Emergency powers.
Sec. 304. Citizen suits.
Sec. 305. Representation in litigation.
Sec. 306. Federal procurement.
Sec. 307. General provisions relating to administrative proceedings and judicial review.
Sec. 308. Mandatory licensing.
Sec. 309. Policy review.
Sec. 310. Other authority not affected.
Sec. 311. Records and audit.
Sec. 312. Comprehensive economic cost studies and studies of cost effectiveness analysis.
Sec. 313. Additional reports to congress.
Sec. 314. Labor standards.
Sec. 315. Separability.
Sec. 316. Sewage treatment grants.
Sec. 317. Short title.
Sec. 318A. Economic impact assessment.
Sec. 318B. Financial disclosure; conflicts of interest.
Sec. 319. Air quality monitoring.
Sec. 320. Standardized air quality modeling.
Sec. 321. Employment effects.
Sec. 322. Employee protection.
Sec. 323. Cost of emission control for certain vapor recovery to be borne by owner of retail outlet.
Sec. 324. Vapor recovery for small business marketers of petroleum products.
Sec. 325. Exemptions for certain territories.
Sec. 326. Construction of certain clauses.
Sec. 327. Appropriations.
Sec. 328. Air pollution from outer continental shelf activities

TITLE IV – ACID DEPOSITION CONTROL
Sec. 401. Findings and purpose.
Sec. 402. Definitions.
Sec. 403. Sulfur dioxide allowance program for existing and new units.
Sec. 404. Phase I sulfur dioxide requirements.
Sec. 405. Phase II sulfur dioxide requirements.
Sec. 406. Allowances for States with emissions rates at or below 0.80lbs/mmBtu.
Sec. 407. Nitrogen oxides emission reduction program.
Sec. 408. Permits and compliance plans.
Sec. 409. Repowered sources.
Sec. 410. Election for additional sources.
Sec. 411. Excess emissions penalty.
Sec. 412. Monitoring, reporting, and recordkeeping requirements.
Sec. 413. General compliance with other provisions.
Sec. 414. Enforcement.
Sec. 415. Clean coal technology regulatory incentives.
Sec. 416. Contingency guarantee; auctions, reserve.

TITLE V – PERMITS
Sec. 501. Definitions.
Sec. 502. Permit programs.
Sec. 503. Permit applications.
Sec. 504. Permit requirements and conditions.
Sec. 505. Notification to Administrator and contiguous States.
Sec. 506. Other authorities.
Sec. 507. Small business stationary source technical and environmental compliance assistance program.

TITLE VI – STRATOSPHERIC OZONE PROTECTION
Sec. 601. Definitions.
Sec. 602. Listing of class I and class II substances.
Sec. 603. Monitoring and reporting requirements.
Sec. 604. Phase-out of production and consumption of class I substances.
Sec. 605. Phase-out of production and consumption of class II substances.
Sec. 606. Accelerated schedule.
Sec. 607. Exchanges. [Exchange authority.]
Sec. 608. National recycling and emission reduction program.
Sec. 609. Servicing of motor vehicle air conditioners.
Sec. 610. Nonessential products containing chlorofluorocarbons.
Sec. 611. Labeling.
Sec. 612. Safe alternatives policy.
Sec. 613. Federal procurement.
Sec. 614. Relationship to other law.
Sec. 615. Authority of Administrator.
Sec. 616. Transfers among Parties to the Montreal Protocol.
Sec. 617. International cooperation.
Sec. 618. Miscellaneous [provisions].

14) The Environmental Protection Agency — through such insane legislation as the Endangered Species Act — has also destroyed thousands of businesses and created tens of thousands of new regulations that impede virtually any sort of construction or building project one undertakes today.

15) The passing of the Corporate Average Fuel Economy standards — so-called CAFÉ standards — has helped destroy thousands of jobs in the automobile industry and has also caused many thousands of deaths since death in automobile accidents occurs at a much higher rate in the small cars the legislation has forced Americans to drive.

16) Then we have the nightmare known as “Sarbanes-Oxley Act”. Take a gander at just the titles of the different provisions of this Act:

Section 3: Commission Rules and Enforcement
Section 101: Establishment; Administrative Provisions
Section 102: Registration with the Board
Section 103: Auditing, Quality Control, And Independence Standards And Rules
Section 104: Inspections of Registered Public Accounting Firms
Section 105: Investigations And Disciplinary Proceedings
Section 106: Foreign Public Accounting Firms
Section 107: Commission Oversight Of The Board
Section 108: Accounting Standards
Section 109: Funding
Section 201: Services Outside The Scope Of Practice Of Auditors
Section 202: Preapproval Requirements
Section 203: Audit Partner Rotation
Section 204: Auditor Reports to Audit Committees
Section 205: Conforming Amendments
Section 206: Conflicts of Interest
Section 207: Study of Mandatory Rotation of Registered Public Accountants
Section 208: Commission Authority
Section 209: Consideration by Appropriate State Regulatory Authorities
Section 301: Public Company Audit Committees
Section 302: Corporate Responsibility For Financial Reports
Section 303: Improper Influence on Conduct of Audits
Section 304: Forfeiture of Certain Bonuses and Profits
Section 305: Officer And Director Bars And Penalties
Section 306: Insider Trades During Pension Fund Black-Out Periods
Section 307: Rules of Professional Responsibility for Attorneys
Section 308: Fair Funds for Investors
Section 401: Disclosures In Periodic Reports
Section 402:Enhanced Conflict of Interest Provisions
Section 403: Disclosures Of Transactions Involving Management And Principal Stockholders
Section 404: Management Assessment Of Internal Controls
Section 405: Exemption
Section 406: Code of Ethics for Senior Financial Officers
Section 407: Disclosure of Audit Committee Financial Expert
Section 408: Enhanced Review of Periodic Disclosures by Issuers
Section 409: Real Time Issuer Disclosures
Section 501: Treatment of Securities Analysts by Registered Securities Associations and National Securities Exchanges
Section 601: Authorization of Appropriations
Section 602: Appearance and Practice Before the Commission
Section 603: Federal Court Authority to Impose Penny Stock Bars
Section 604: Qualifications of Associated Persons of Brokers and Dealers
Section 701: GAO Study and Report Regarding Consolidation of Public Accounting Firms
Section 702: Commission study and report regarding credit rating agencies
Section 703: Study and report on violators and violations
Section 704: Study of Enforcement Actions
Section 705: Study of Investment Banks
Title VIII: Corporate and Criminal Fraud Accountability
Title IX: White Collar Crime Penalty Enhancements
Title X: Corporate Tax Returns
Section 1001: Sense of the Senate Regarding the Signing of Corporate Tax Returns by Chief Executive Officers
Title XI- Corporate Fraud and Accountability
Section 1102: Tampering With a Record or Otherwise Impeding an Official Proceeding
Section 1103: Temporary Freeze Authority for the Securities and Exchange Commission
Section 1105: Authority of the Commission to Prohibit Persons from Serving as Officers or Directors

Out of respect for the space requirements of this blog, I will not go on. But it is pure, unadulterated fantasy — or just an outright lie — to claim that we’ve been “gashing regulation”.

Anonymous August 14, 2009 at 7:53 pm

Are you crazy? Can’t you just post a link? The length of this post is completely inappropriate.

Anonymous August 15, 2009 at 5:24 am

Viking,

I hope you were joking.

Posting all of that was absolutely important in illustrating the absurdity of Yasafi’s assertion that regulations have been gashed.

What I wish Michael had been able to do is list each of those sections as a link, so that we could easily see the texts of those Sections.

Micheal’s post also helps illustrate why it’s useful to keep Yasafi around, even though he’s a moron. Not many people are stupid enough to assert that we’ve gashed regulations, but there are a few here who believe that the State isn’t all that intrusive.

I just read the first paragraph of Daniel’s post, below, and it appears that maybe I should strike the paragraph pointing out Yasafi’s usefulness. But then again, Daniel and Yasafi aren’t the only Statists hanging around the Cafe.

Anonymous August 15, 2009 at 5:48 am

I have a 13 inch laptop, and muirgeo is not worth it.

You should know by now that he neither absorbs, nor probably even reads responses to him, or anything else at the Cafe. For replies to muirg’s inanities that are meant for the benefit of the sane, would a set of links not suffice?

Anonymous August 15, 2009 at 6:57 am

Viking,

I sympathize, but I thought it was brilliant and necessary to illustrate the sheer magnitude of regulation, just by citing sixteen (out of hundreds-of-thousands?) examples. I’ll take Michael’s long post, even if it is a reply to Yasafi, over the miles-and-miles of Martin-postings … even when I agree with Martin.

I agree with you that it’ll have absolutely no effect on our Dear Ducktor, but then a lobotomy would probably improve Yasafi’s IQ. So there we are :p

Daniel Kuehn August 14, 2009 at 8:20 pm

I’m not agreeing with muirgeo, but can’t we at least stipulate that the sheer number of regulations isn’t the same thing as the restrictiveness of regulation?

“Common knowledge” says that at least Carter and Reagan had major deregulating initiatives. Clinton of course is known for deregulating at least a specific industry. None of the rest, are especially well known for “re-regulating”.

I’m not making a case that “common knowledge” is always right, and I’m not saying that the absolute number of pages of regulation hasn’t increased. But are we really saying that these “general impressions”, this “common knowledge” has no basis in reality at all? There has to be a reason why there is a general impression that regulation increased into the seventies, and that in the late seventies and since then substantive regulation (not absolute number of pages, granted) has decreased. We know that profits as a percentage of GDP has increased steadily since the 70s – are you saying that that happened in an environment of increasing regulation?

I’m not saying everything is great with the current state of regulation. I just wonder about the narrative that things are constantly getting worse and worse and worse. Occam’s razor leaves me thinking that Congress has probably loaded up the regulatory code with minutae, they’ve probably reduced the total, real budern imposed by regulation, and it has probably had some impact on firm behaviors that lead to the crisis. It doesn’t explain everything, it’s not that businesses aren’t hampered by regulation anymore – they are.

I guess I’m just wondering – if this era of “deregulation” is “pure, unadultered fantasy” or an “outright lie”, then HOW did people get this impression?

This isn’t a defense of muirgeo’s wider point – I want to emphasize. But muirgeo’s idea that this is an era of “deregulation” is so pervasive that I have to wonder about people who challenge that – and I hope you can understand why citations of absolute page counts don’t really convince me, nor do they convince a lot of other people.

Anonymous August 14, 2009 at 8:41 pm

The problem is that there is a general ongoing trend toward regulation pretty much across the board, but there have been targeted areas of deregulation that have been very visible. Most of these areas have been unmitigated successes, like trucking & airlines. Have you seen the youtube footage of Milton Friedman on the Donahue show 30 years ago? When he suggests we should deregulate interstate trucking, which at the time was a labyrinth of rent-seeking, Donahue is aghast, as if Friedman is insane & chaos will ensue. There isn’t a sane person alive who would like to re-regulate airlines & trucking. In fact, there is a LOT of deregulation still called for in airlines. But, there is a narrative in people’s mindsets that says, if there is a problem, then regulation MUST be the solution. So they misrepresent the true details of regulations over the past 30 years by remembering that there was some deregulation, applying this idea in the most general sense where it becomes inaccurate, and then blaming all of our problems on it.

Daniel Kuehn August 14, 2009 at 8:52 pm

Right – and I’m no defender of that narrative (the narrative that “if there is a problem, then regulation MUST be the solution”). I’m just a little concerned about an equally oversimplified and incorrect narrative in the other direction that relies on page counts, which prevents us from thinking critically about whether regulation in specific cases is merited or not.

“We’ve had too much so why would you advocate more” and
“We’ve slashed it all so why would you advocate less” are BOTH antithetical to critical thinking on the issue.

Anonymous August 14, 2009 at 9:17 pm

That’s all well & good, but can you name a single actual protectionist law that you would defend? You’ve written a lot about the pretend laws you come up with in your theoretical world, can you think of a single actual law you would defend? If you can’t, then I think you can pretty safely say “we’ve had too much so why would you advocate more” without danger.

Sam Grove August 14, 2009 at 8:55 pm

I guess I’m just wondering – if this era of “deregulation” is “pure, unadultered fantasy” or an “outright lie”, then HOW did people get this impression?

Perhaps they’ve been giving too much credence to media reports of this “meme”.

It is still fresh in my memory how modifications of electrical generation and distribution regulations in California were constantly reported as “deregulation”. Constantly!

Anonymous August 14, 2009 at 10:55 pm

What kind of person even asks a question like that, when you can get the answer simply by looking to see if and what the regulations are? Who are these people who look to impressions of the truth for their answers, instead of the facts themselves?

Sam Grove August 14, 2009 at 11:05 pm

Someone who uses so many words to say so little, that’s what kind.

Not a few people realize that the world is dominated by perception, and so take great pains to promote faulty perceptions.

A lot of people still think the wild, wild west was rife with crime, even though the crime rate was less than in say, Detroit.

Anonymous August 15, 2009 at 1:05 pm

You can look at what the regulations are, but if you don’t have a thorough background in regulation, you can’t tell whether that big long list that was postedd was a really significant regulation or a minor annoyance.

Since when has page count been a real measure of regulatory burden? Especially since every regulation has some costs and some benefits. Since when has page count been an adequate measure of the balance of costs and benefits in the regulatory code?

What kind of person thinks it is?

sandre August 14, 2009 at 9:02 pm

Danny says…”We know that profits as a percentage of GDP has increased steadily since the 70s – are you saying that that happened in an environment of increasing regulation?”

Yes, that’s what regulations do. They distort markets, usually in favor of the bigger players. It gives them oppotunities to monopolize, seek rent, it also kills their less favored competitors etc. While profits are not a bad thing, in a free-market, competition will generally keep pressure on profits, whereas, government granted regulatory favors will keep them up.

Daniel Kuehn August 14, 2009 at 9:06 pm

Sure – I’m not drawing a one-to-one relationship between deregulation and profits. It’s just another general point.

Think of it this way – are you saying that you want to deregulate to make businesses less profitable? Of course not.

Don’t get caught up in that point – I’m not denying the rent-seeking origin of a lot of regulation.

sandre August 14, 2009 at 9:34 pm

Yeah, mine was a general answer, it was not directed at a specific regulation, specific industry, or a specific player.

I said nothing about deregulating to minimize profitability, I would deregulate to maximize fairness, freedom, innovation, consumer choice.

I am not caught up in anything, others are responding to your comment, I just chose to respond to a particular point. I could do the same with other points as well. Now, I need to get back to work.

Sam Grove August 14, 2009 at 10:49 pm

…deregulate to make businesses less profitable?

Or… to make business, and the economy in general, more efficient and productive by, for one thing, reducing rent seeking.

mesaeconoguy August 15, 2009 at 12:02 am

“Common knowledge” says that at least Carter and Reagan had major deregulating initiatives.

Ummm….wrong. Not even close, dude.

The most precise over-time measure is by CEI’s Clyde Wayne Crews, measuring the number of pages of regulations published by each presidency in the official Federal Register. The last year of the Carter Administration produced 73,258 pages of regulation. By the end of the Reagan term, regulations were down substantially to 50.616 pages. By the end of the Clinton years, the number of pages was back up to 64,438. But the Bush Administration ended 2007 with 72,090 pages – almost back to where Reagan began.

[Small Government Failure?]

Please do research before making stupid statements. Thank you.

Anonymous August 15, 2009 at 1:12 pm

Stupid statements?

Explain to me how pages of regulation are at all a “precise” measure of regulatory burden? There’s a world of difference between building a ramp for wheel chair access and a capital requirement.

Please think a little harder about your posts before accusing other people of being stupid, and don’t believe everything you read at the American Conservative Union Foundation. They have a vested interest in arbitrating what is the “most precise” measure. Nobody is calling you “stupid” – I’m not sure why you feel the need to throw the word around yourself.

sandre August 15, 2009 at 4:47 pm

Mr. Empiricist, do you have an alternate measurement?

Anonymous August 14, 2009 at 9:20 pm

And NOT ONE of those regulations or all together explains the crisis wer are now in.

Repeal of Glass Steagal and the Gramm-Leach-Bliley Act (GLBA), decreasing lending standards and credit requirements ALL explain were we are at.

Free trade changes explain our trade debt and tax cuts and shelters explain our deficit.

You printed a big list that means nothing because you can’t logically show evidence that it had anything to do with our economic collapse while the dropped regulations can specifically be linked to the problems we have before us.

Sam Grove August 14, 2009 at 10:52 pm

Repeal of Glass Steagal and the Gramm-Leach-Bliley Act (GLBA), decreasing lending standards and credit requirements ALL explain were we are at.

Hardly all. You’re just throwing out your favorite straw men while ignoring other factors. including the elephant in the room.

Anonymous August 15, 2009 at 2:16 pm

I challenge you to explain how sub-prime loans would ever get passed along and securitized to the extent they did if it weren’t for repeal of Glass Steagal and passage of the Gramm-Leach-Bliley Act (GLBA).

You won’t, you can’t…, simple as that.

Here I’ll start you. Its 1960 and I’m a guy with no job and no income…. Mr Sam the banker will you loan me $100,000 to buy a house???? Please…..

Now it’s 2003…. and I’m a guy with no job and no income…. Mr Sam the banker will you loan me $100,000 to buy a house???? Please…..

Sam Grove August 15, 2009 at 3:53 pm

Sigh,…can you read?

I did not say that GS or GLBA had “nothing” to do with where we are at. I suggested that your explanation is incomplete and ignores even larger factors.

IOW, you magnify these two into total explanations while diminishing or ignoring even larger factors because you prefer to blame so-called “free markets” over political interventions as cause for economic woes.

I challenge YOU to show, with evidence, (not quoting unsubstantiated assertions by others) that G-S and GLBA caused the “melt down”.

sandre August 14, 2009 at 9:29 pm

Don’t be tempted to respond to muir. He doesn’t have the mental faculty to deal in facts. It’s sorta of like fighting with a pig. You both will get dirty, but the pig loves it.

Anonymous August 15, 2009 at 6:50 am

So what does the number of regulations prove?. One paragraph deregulating banking would probably have 100 times the effect of everything in your obnoxious post. Some regulations are just a lot more important than others.

Henry Blankett August 14, 2009 at 9:00 pm

What do you call an a self-proclaimed “free trade” economist who defends China’s protectionist policies by 1) first erecting the straw-man of a bogus “free” subsidy controversy (who, precisely, are all these people supposedly complaining about “free” Chinese subsidization of Chinese domestic industry?); and 2) then concocting an elaborate story-metaphor designed to avoid providing specific numbers to address event the bogus strawman itself?

sandre August 14, 2009 at 9:05 pm

You would have more credibility if you had not used the words “defends China’s protectionist policies”, but you chose otherwise. The so called “free trade” economist did no such thing. I will give you benefit of the doubt, you are speaking from a preconceived notion about “free trade” that is no rooting in reality.

Henry Blankett August 14, 2009 at 11:40 pm

How about the word “dismisses” instead of “defends”? Prof. Bourdreaux dismisses China’s protectionist policies as being essentially “no big deal”, because, he claims, the added costs used to subsidize, say, China’s steel industry, will somehow harm, say, China’s toy-making industry, which will, in turn, help America’s toy-making industry. Therefore, he says (read his linked Trade Grade piece), America shouldn’t complain.

Question: What non-subsidized Chinese industries (are there any other kind?) have been unable to compete globally? Which ones haven’t been able to almost totally dominate? If China has supposedly shot itself in the foot by subsidizing so much of its domestic industry (designed for export), why are the U.S. and others being crushed anyway? Where is this great Chinese failure to compete occurring?

Here’s something else. In his previous article to this one, the author says, in so many words, that the U.S. should simply submit to Chinese mercantalist practices, and passively accept the situation, no matter how devastating it is to American (domestically-located) business :

“It’s true that Americans would be better off if Beijing pursued laissez-faire economic policies. But, practically, that’s none of our business.”

It’s not? Where is it written that it’s “none of our business”? We do allow them to dump their sometimes dangerous products on our shores, don’t we? Americans should just shut-up and take it in the backside – where is that strategy mentioned by Ricardo in his Principles?

sandre August 15, 2009 at 12:19 am

Just disagreement in opinion enough to use words such as bogus? Then you went onto use words like ‘concoct’? Do you have any evidence to question the integrity of Prof. Boudreaux. Do you think that these issues are so black and white, and that you are right and everyone else is wrong?

1) Why is it a strawman to talk about unfree subsidies. Who subsidizes chinese industry? Ans: Chinese Govt. Where does that money come from? Chinese tax payers – both individual and corporate. Who benefits? The subsidized industry and their customers ( around the world, large number of them in this country).

2) If metaphor is wrong, then why don’t you point out why the metaphor doesn’t describe the scenario of trade between a chinese business and their american counterparts? I mean specifically the holes in the metaphor.

You ask “It’s no?”. The answer is a resounding NOOOOO. You say again “Americans should just shut-up and take it in the backside”. The answer is it’s your business to decide whether you want those “dangerous” products. If it is life threatening or something closee, you can sue the retailer, whether it’s apple, walmart or Costco who sold you the product. You can decide not to buy products from that store, you can avoid shopping anything made in China.

Here is a factoid about mercantilism…”Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy; by encouraging exports and discouraging imports, notably through the use of tariffs and subsidies.

David Hume, Locke, Adam Smith has written extensively about futility of mercantilism. You, sir, are the mercantilist for believing that it gives china some kind of advantage.

Anonymous August 15, 2009 at 6:55 am

Do you think you and the crowd are right and everyone else is wrong? Did you all go to GMU? Even Alan Greenspan admitted he doesn’t understand what happened. And I believe he was one of yours.

Henry Blankett August 15, 2009 at 10:14 pm

“Why is it a strawman to talk about unfree subsidies.”

No, the straw-manis the alleged “free”, not unfree, subsidies the author claims protectionists are up-in-arms about.

“Who benefits? The subsidized industry and their customers ( around the world, large number of them in this country)”.

Ok, so at least on the first part of your statement, we agree: the Chinese-subsidized industries ARE benefiting from the subsidies. Take it a step further, however; U.S. companies in the same industry are being harmed because of that.

Take it further: U.S. customers are really NOT benefiting from Chinese subsidization. Sure, they may be able to save an extra fifty-cents here-and-there on certain products, but the almost bottomless costs of losing vast swathes of domestic industry to cheap foreign competition outweighs those 50-cent “savings” by an almost immeasurable scale. What would you rather have? A solid blue-collar or middle-class job, while paying $14 for a plastic bucket, or having an $7.50/hour Wal-Mart position, while paying $13 for a plastic bucket? A home accurately valued at $500,000 — or a $500,000 home whose value is reduced by 1/3 due to economic disaster catalyzed in large part by your neighbors’ lost jobs/lowered wages and resultant foreclosures? (This, of course, is the 1/2 of the housing bubble’s cause). An army of corporate-funded economists may try to obfuscate the masses, but, in the end, they can’t change reality.

Anonymous August 14, 2009 at 10:41 pm

“a self-proclaimed “free trade” economist who defends China’s protectionist policies”

Is it possible for you to have a reasonably intelligent post? Dr B CLEARLY CRITICIZED not only China’s protectionist policies, BUT EVERYONE’S PROTECTIONIST POLICIES.

Aren’t you the least bit embarrassed by your overt falsehoods? Show some integrity and at least fully read a post before you respond. Man, I hope “Henry Blankett” is a pseudonym.

Mathieu Bédard August 14, 2009 at 9:44 pm

it benefits the local consumers at the expense of the foreign tax payers…

Anonymous August 14, 2009 at 9:50 pm

Your old article (and a fine one it is) is located at:

http://www.tcsdaily.com/Article.aspx?id=101003F

Anonymous August 14, 2009 at 9:59 pm

I see nothing wrong with China’s investment in America, unless you’re a racist xenophobe of course.

sandre August 14, 2009 at 10:08 pm

BTW, there are a couple of good talks on mises media ( mises.org ) from the recent mises university. I really enjoyed the talk by Roger Garrison on Vienna versus Chicago, and the talk by Tom Woods on doing economic history.

mesaeconoguy August 15, 2009 at 12:27 am

If I were a regressive like muirgeo, adamantly opposed to so-called “free trade” (which definitely isn’t free) on protectionist grounds, but unwilling to admit that this strategy is a complete historical failure, I would argue this:

There is a political limit to the extent of free trade as it is constructed. The current Chinese mass-consumption of US debt poses real and dangerous potential geopolitical consequences, particularly if they gain politico-economic leverage via Iran to effectively control (or destroy) the Middle East.

China, as a developing economy, is extremely dependent on natural resources, and will seek to gain advantage in every arena possible. They also have the worlds largest labor supply.

They are the largest consumer of US debt. Yes, we could theoretically default, and that would throw the world financial system into massive, possibly fatal, convulsions.

Will the Chinese deter Iran from nuking Israel? Doubt it. Will Israel not retaliate? Doubt it. Will a diminished US standing (economic and political) contribute to the malfeasance opportunity here? Definitely.

We (western “capitalist” society) have to play by certain rules, and China does not. The currency parity and debt issue, while slightly troubling, is the tip of the iceberg here.

Then again, no brain-dead regressive possesses that depth of analytical ability.

Anonymous August 15, 2009 at 1:16 am

You printed a big list that means nothing because you can’t logically show evidence that it had anything to do with our economic collapse while the dropped regulations can specifically be linked to the problems we have before us.

In the first place, my “big list” illustrates the insanity of your contention that we’ve spent the last thirty years “gashing regulation”. In fact, just since 1990, the Code of Federal Regulations has expanded from 54 volumes to 78 volumes.

In the second place, as is so typical of you and your ilk, once one of your contentions is thoroughly refuted, you abandon that contention — you simply pretend that it never existed — and instead you switch to a NEW contention. I could just as easily expose the insanity of your latest contention — if I thought you were worth the effort. You aren’t.

In the third place, it is evidence of your hopeless mindlessnes that you view a LAW which MANDATES a lowering of lending standards to be an example of “gashing regulation”.

The bottom line is that you are a looter, an enemy of freedom, a hater of all men of ability and a wannabe parasiite who seeks to exist without effort, by having all the productive people of America chained, drained and bled dry. You will ultimately get exactly what you deserve.

Anonymous August 15, 2009 at 2:08 am

Which one of those regulations alone or in combination can you point to and explain a plausable mechanism of how it / they causedd the current economic collapse?

I can give you very logical explainations and mechanisms of how the regulation cuts I cited caused this fiasco.

mesaeconoguy August 15, 2009 at 2:10 am

No, you can’t. You can’t even understand trade. You’re a moron.

mesaeconoguy August 15, 2009 at 2:14 am

Explain:

mesaeconoguy August 15, 2009 at 2:14 am
mesaeconoguy August 15, 2009 at 2:15 am
mesaeconoguy August 15, 2009 at 2:15 am
mesaeconoguy August 15, 2009 at 2:17 am
mesaeconoguy August 15, 2009 at 2:18 am

Go read the rules, dumbass.

Ooops, drop your scalpel?

sandre August 15, 2009 at 4:08 am

You are wasting your time. Instead, you should engage someone with a IQ above room tempertature, someone who is not an inveterate liar. Look what he said about post Reagan recessions – a patent lie.

Anonymous August 15, 2009 at 6:30 am

I’m glad to hear what muirgeo has to say, as it dampens this echo chamber a bit.

Most of this board prays at Don Boudreaux’s feet, while Mr. Boudreaux carries water for the likes of Olin, Koch and Scaife industries. muirgeo is correct, Libertarianism has never been tested on a scale larger than Survivor; it has absolutely no track record, and never will. it’s idealist form is impossible secondary to human nature and its pragmatic form is essentially slavery. All the posters that despise unions should research “The Battle of Blair Mountain” to get an idea of what unrestrained capitalism is capable of. As JMK stated it, ” Capitalism is the astounding belief that the most wicked of men will do the most wicked of things for the greatest good of everyone.”

Thank you muirgeo and I would bet you are one of the most intelligent people on this board; but your typing does suck.

Anonymous August 15, 2009 at 2:17 am

“The bottom line is that you are a looter, an enemy of freedom, a hater of all men of ability and a wannabe parasiite who seeks to exist without effort, by having all the productive people of America chained, drained and bled dry. You will ultimately get exactly what you deserve.”

Really… I literally worked many 100+ hour weeks to get the training for my current occupation. I worrk 40 -50 hours a week. I pay into social security and Medicare and have never used them. I’ve never collected unemloyment and I am in the top 5% of income earners which means I pay a far more proportionate share of taxes.

But you are the guy defending the Goldman Sachs CEO’s who basically run our governement and the Federal reserve and print themselves as much money as they want. Then they exect taxpayers like me to bai, them out.

THOSE our the guys who have busted our budget, stole from the productive economy and taxed us to pay for the fall out… they are the ones that have incomes so high that we see the massive income inequality that robs hard working people like myself and destroys any hope of a useful goernement.

You defend their accumulation of power as if it was some sort of free market earned income when it was nothing of the sort. THEY are the scavengers, the looters, the haters of fair markets and competition. They are the economic royalist to whom you bow your foolish head to.

mesaeconoguy August 15, 2009 at 2:22 am

Shut up & see above. :)

Anonymous August 15, 2009 at 2:36 am

Have you ever READ anything at Cafe Hayek, or do you just blindly post?

sandre August 15, 2009 at 4:20 am

don’t wrestle with a pig…why is he so obsessed with cafe hayek?

Anonymous August 15, 2009 at 4:25 am

Maybe he’s a bot. Maybe the exact same posts show up on hundreds of blogs around the world. It is unfathomable that he hasn’t learned to anticipate the responses to his posts and move the debate forward. He says things about Profs R&B and Cafe Hayek posters that even he must know are absurd by now–if he’s human.

Babinich August 15, 2009 at 1:30 am

“Importantly, brothers Bill, Carl, and Dave have fewer resources with which to pursue their dreams of becoming chefs; they are hindered at developing skills that would make each one of them as productive (and, hence, as prosperous) as possible.”

Don’t worry Don. I hear the Government is hiring…

mesaeconoguy August 15, 2009 at 1:44 am
mesaeconoguy August 15, 2009 at 4:22 am

Muirgerk, you seem like a decent guy.

Ok, just “guy.”

As a medical “professional,” how can you possibly justify giving bureaucrats control of your life? Hippocratic oath & all…

mesaeconoguy August 15, 2009 at 6:29 am

While you’re at it, please explain the economics of overutilisation for subsidized goods.

muirgeo August 15, 2009 at 7:10 am

Sure I can explain that. … In our country the Insurance companies and Pharma decide what is subsidized and what is not via their powerful lobbying influence on government policy. In counties with single payer plans the subsidies don’t really exist or are arguable pretty much universal and the desires of the actual people who live in those countries are put ahead of the needs of corporations.

Here’s the results. Wow…. you ARE right. Subsidies are expensive.

Anonymous August 15, 2009 at 7:11 am

Better than that, how about a real world study, like they use in science. Check out the Rand HIE study, which is particularly pertinent to muirgeo’s viewpoint. Bottom line is very moderate increase in utilization of free healthcare vs 25, 50, 75 and 95% copay.

Anonymous August 15, 2009 at 9:35 pm

Great reference schwabby.

muirgeo August 15, 2009 at 7:00 am

I’d argue my professional life and practice are far more effected by practices and lobbying of the big medical insurance and pharmacy companies then by burdensome governmental regulation.

When I worked for private insurance companies I had to spend all my time trying to get them to approve an MRI , a drug or some other test. I had to look through 10 different formularies to know which drugs I could prescribe. They pitted doctors group against doctors group in contracting resulting in a death spiral for many small practices and the virtual end of solo practice. My patients constantly had to leave my practice because their insurance changed. Fucking Aetna moved into town and set up a big office and stole my employees away from my practice as they could afford to pay them twice what I could and they could afford to give them far better benefits then I could with the reimbursements THEY paid me.

Now they cherry pick patients leaving the sick and uninsurable for all of us to treat and pay for.

If you had a single payer system my life would be much easier and when everyone in the country was invested in the plan the bureaucrats would respond to our concerns. Now the bureaucrats respond to the lobbyist of those companies I just describe above that make life and practice a miserable hassle.

Mesa what do you think insurance would cost the average 65 year old (if they would even cover him) in a free market health care system with no Medicare?

Anonymous August 15, 2009 at 8:21 am

“what do you think insurance would cost the average 65 year old (if they would even cover him) in a free market health care system”

That’s really a function of actuarials and so depends on the person and what they are insuring against. For unexpected age-related diseases, you’d expect on average the premiums to be higher than for younger people. For expected events, you’d expect premiums to be so high that it would be cheaper to finance directly yourself. Which leads us to…

What do you think HEALTH CARE would cost in a free market system where consumers get to keep what they save and don’t have to prepay though a third-party insurance or government middleman?

How much WEALTH do you think people age 65 would have if they could keep the 15.3% + compounded interest of every wage they’ve ever earned?

How much MEDICARE BENEFIT do you think seniors will get as tax revenues and deficit financing can no longer perpetuate the growing >$30 trillion unfunded liability, and the only thing left to avoid default is to cut reimbursements?

You seem to labor under the fantasy that having the government take your wealth, invest it all in T-bills, eat its share, and maybe pay you back some of what’s left without the option of keeping any savings you can find, somehow makes you wealthier than if you could just keep, invest, inherit, and spend that money yourself.

This magical pot of gold the Federal government has, where do you think they hide it?

Anonymous August 15, 2009 at 2:33 pm

Don’t you think it’s a bit curious that your system which is supposed to be so successful and superior exist no where in the word?

I mean that’s a fair question. People pretty much just want a fair shake and a good deal. If your system was so successful I’m sure wed all be happy to adopt it. But it’s not successful… except for the very few on top. And for them few with a conscious it still sucks to see tin cups and desperately poor people everyday on your way to work. Not to mention technology and progress over all slow down.

See your assumption IMO is wrong in thinking is that if we had a free market system there would still be a strong middle class that makes the same wages the current middle class does. And if only they didn’t have to pay into medicare and social security they’d make even more and the economy would be even better.

But the closet things to that are well written in books By Dickens. All the wealth and power and control goes to the top and workers beg at the feet of the few employers to have a barely sustenance wage… if they don’t they are black balled and put on a list and never hired again.

Government as inefficient as it is provides rules for the game, a common infrastructure and increases the speed of dollars circulating through the economy.

sandre August 15, 2009 at 5:11 pm

don’t be tempted to roll in the mud with a pig. This has been hashed and rehashed several times on this blog. He can politely say that he disagree and leave, or come up with some new points. He does neither. He can’t point to a successful collectopia either. We have been down that path several times.

Babinich August 15, 2009 at 10:02 am

“what do you think insurance would cost the average 65 year old (if they would even cover him) in a free market health care system with no Medicare?”

Muirgeo,

What do you think it costs to cover the average 65 year old with Medicare?

There is no actual evidence that the elderly receive better care or more cost-effective care.

The U.S. spends about 40 percent more per capita on health care for the elderly, just as we spend about 40 percent more per capita on health care for those under 65. Where’s the vaunted Medicare efficiency?

Medicare faces tens of trillions of dollars in unfunded liabilities, which is the gap between what future beneficiaries have been promised and the taxes we expect to collect to fund those promises.

How about “the best and the brightest” fix Medicare before adding to our mounting deficit?

Per Kurowski August 15, 2009 at 12:17 pm

I don´t get this post! What about Abe´s right to do as he bloody hell pleases even if he is wrong? Is this kitchen door communism?

This continues discussion of specialization also gets a little bit out of focus when so much of the specialization falls into the category of being unemployed. There comes a moment when the societal value of keeping people busy, doing useless anti-economical things, might be higher than the economic value derived from trade specialization. Or at least the economic benefits from trade should be used to pay for the indirect costs of trade-

For the time being, while the US has the printing machine of tickets to what is perceived as a safe-haven, should the US therefore especially in selling treasury bonds to the world and not work at all?

Anonymous August 15, 2009 at 1:01 pm

But you are the guy defending the Goldman Sachs CEO’s who basically run our governement and the Federal reserve and print themselves as much money as they want. Then they exect taxpayers like me to bai, them out.

THOSE our the guys who have busted our budget, stole from the productive economy and taxed us to pay for the fall out…

This is the standard tactic of all statist — ascribing to the private sector all the evils that are possible only to those holding government power to regulate economic activity — then demanding, as the “solution”, the expansion of those very powers to regulate.

The power to tax, the power create and enforce a fiat currency, the power to inflate that currency at will, the power to expand government spending so as to “bust the budget”, the power to affect a transfer of wealth to “bail out” some at the expense of others, the power to “steal from the productive economy” — these are all government powers — no private individual, acting on his own, including the CEO of Goldman Sachs, has the power to do any of this.

A private individual who prints counterfeit money –like a private individual who steals from one man to give the money to another man — is a criminal who will be arrested and prosecuted for his crime. Only the government can do these things with impunity.

The only power the private individual has in this situation is the power to “lobby” to have regulations bent in his favor. The existence of such government regulation invites and breeds such “lobbying” — and the greater the extent of the regulation, the greater the motivation (and in many cases, the greater the need) to engage in such lobbying.

The solution to this problem is obvious

If one observed private businesses paying “protection money” to mobsters — to prevent those mobsters from torching their business or wrecking their delivery vehicles or assaulting their employees — and if one further observed that some of these businessmen, the biggest and the richest of them, were taking advantage of the situation by making extra-large payments to the mobsters in exchange for the mobster’s bringing additional pressure to bear on their competitors — one would not say that the solution is to increase the number of mobsters and boost their firepower.

Yet such is precisely the demand of the muirgeo’s of the world, who completely evade the role of the mobsters, pretend that private businessmen posses the legal power to carry out a campaign of extortion, and then assert that the only solution is to employ additional, better-armed mobsters to keep these evil businessmen in check.

An evasion of this magnitude — Ayn Rand would say — isn’t ignorance, it’s a refusal to know; not blindness, but a refusal to see.

Anonymous August 15, 2009 at 2:49 pm

No Michael in the old days the church ran the government. We mostly put up a wall between the church and state and that solved the problem. Now in place of the church are mega corporations and their money.

You always need government so you can’t get rid of it unless you’re a silly anarchist.

So what needs to happen is to diffuse the power of the government into thew hands of THE PEOPLE and out of the hands of CORPORATIONS. You do that by erecting a wall that separates Money and State. That’s the key.
Might sound silly but it’s very serious.

I understand your position to simply make state weaker so it can’t give things a way. But the problem with that is the money people will always turn the state more powerful so they can have more control. It doesn’t work.

And a weak state can’t do what it needs to for the people. Who’s going to take care of the guy crapping in the river upstream of you?? Nothing wrong with a “strong state”… it doesn’t mean communism, statism or socialism… as long as it’s power is diffused into the hands of the many people.

If you don’t believe in people overall this scenario doesn’t work. But if you don’t believe in people we are logically doomed anyway or at least you should go live alone on an island and stop complaining about the nature of people. I see only one logical choice which is to believe in people and to empower them to share governance power equally.

Sam Grove August 15, 2009 at 4:10 pm

I understand your position to simply make state weaker so it can’t give things a way. But the problem with that is the money people will always turn the state more powerful so they can have more control. It doesn’t work.

And a weak state can’t do what it needs to for the people. Who’s going to take care of the guy crapping in the river upstream of you?? Nothing wrong with a “strong state”… it doesn’t mean communism, statism or socialism… as long as it’s power is diffused into the hands of the many people.

That’s quite a conundrum you’ve stated there.

You implicitly acknowledge that a powerful state belongs to the money people yet you insist that we must have a powerful state to protect us from the money people.

Then there’s the idea that centralized power can be diffused among “the people”.

It can’t. Either people have power to control their own lives and product or they don’t.

If this power is delivered into the hands of those manning the political state, then it is no longer in the hands of the people.

You are arguing for collectivism as a means of empowering “the people”, but the reality is that collectivism requires management and management will have the power and the people will be managed.

That does not strike me as very empowering of the many.

Your goal is contradicted by your means.

Intentions are insufficient to produce desired results.

mesaeconoguy August 15, 2009 at 6:24 pm

No Michael in the old days the church ran the government.

Not quite. The Church was government.

We mostly put up a wall between the church and state and that solved the problem.

No, it pushed it to a different area.

Now in place of the church are mega corporations and their money.

Not really. Government has displaced basically everything.

I’m writing a book about this. Our (actually, your) current view of government incorporates most of the elements of mystical worship.

Sam Grove August 16, 2009 at 3:46 am

The state, in the guise of democracy, is his church.

Gil August 15, 2009 at 4:33 pm

“A private individual who prints counterfeit money –like a private individual who steals from one man to give the money to another man — is a criminal who will be arrested and prosecuted for his crime. Only the government can do these things with impunity.”

Actually M. Smith anyone can write up IOUs providing that they are willing to honour their IOUs. Ah, but you wrote ‘counterfeit’ not ‘IOUs’. Counterfeiting is defined as ‘fake money’. So if government dollar bills are ‘counterfeit’ what is ‘real’ money? Oh yeah – gold and silver coins. Governments make sure people use centralised paper money because paper money does quite literally grow on tree whilst gold and silver doesn’t.

“. . . and if one further observed that some of these businessmen, the biggest and the richest of them, were taking advantage of the situation by making extra-large payments to the mobsters in exchange for the mobster’s bringing additional pressure to bear on their competitors — one would not say that the solution is to increase the number of mobsters and boost their firepower.”

Actually increasing the number of different gangs of mobsters might in fact work. The mobsters who get the most business would be those who take care of business for their customers whilst not abusing their customers thus competition would force mobsters to become more honest with time. After all, if the big money to be made is serviing customers than abusing them then this brings in other gangs to get a share of the market such that gangs are then bending over backwards to serve their customers and can’t afford to abuse them and lose their business. Gangs would find they have to transform themselves into literal private defence agencies instead of ‘protection’ agencies.

Anonymous August 15, 2009 at 2:38 pm

OK let me try this again. Protectionism and subsidies are bad. Hands off policies are good. That is supposed to explain why protectionist / subsidizing China is an economic belly flop and why the US endorsing “free trade” has been seeing business BOOMING???

Again… am I missing something?

sandre August 15, 2009 at 3:59 pm

you are missing a brain.

Sam Grove August 15, 2009 at 4:01 pm

why the US endorsing “free trade” has been seeing business BOOMING???

The U.S. may give lip service to “free trade”, but really endorses government managed trade. That’s why the government has all those trade AGREEMENTS full of regulation of trade.

Really, you do not appear to comprehend what we say as we mean it.

Anonymous August 15, 2009 at 3:26 pm

Who’s going to take care of the guy crapping in the river upstream of you?? You always need government so you can’t get rid of it unless you’re a silly anarchist..

You apparently want us to believe that the alternatives are only these two things: 1) A massive welfare/regulatory state, such as we have now, only with even greater regulation, even greater government economic intervention and even greater transfers of wealth from those who’ve earned to those who have not — OR — 2) anarchy.

Your purpose in pushing this false alternative is the hope to obliterate from any consideration the other alternative: laissez-faire capitalism.

Laissez-faire capitalism is not anarchy. It is a system wherein the role of government is constitutionally limited to the protection of individual rights. To acccomplish that, all that is needed from government are: 1) A police force and a criminal justice system to protect men from criminals, i.e. from those who initate the use of physical force or fraud;
2)A civil justice system for enforcing contract law and settling disputes; and: 3) A military force to protect the nation from foreign invaders.

That is pretty close to what we had beginning in 1787 and up until the late 19th century (with the exception of slavery in the south, which took a horrific civil war to eliminate). And it produced the greatest economic progress and improvement in man’s condition that the world has ever seen.

But it is utterly useless to provide you with facts, reasons, evidence or logic — every bit as useless as offering those things to a parrot that has memorized and learned to regurgitate, on cue, a series of leftist talking points.

Fortunately, I don’t think the American people are going to be persuaded by your argument that we must expand the welfare state to include socialized medicine– because the only alternative is to tolerate people taking a crap in our water supply.

Again… am I missing something?

Yes. A willingness to think.

sandre August 15, 2009 at 4:34 pm

You are wasting time. I disagree with your last sentence. It is not or not just a lack of willingness to think – it is a lack of faculties. I don’t immediately say that about anyone. But 4 years of his drivel on this blog is enough experience to make a judgement.

Sam Grove August 15, 2009 at 6:04 pm

He won’t see the elephant in the room.

Jake S. August 16, 2009 at 12:16 am

I don’t have time to read all 119 comments today, so please forgive me if someone has already covered this, but Geoffrey Wood also took on this fallacy in his “Fifty Economic Fallacies Exposed” (IEA Occasional Paper No. 29, 2002)… I’m 99% certain Bastiat addressed it in his “Economic Sophisms”… and I’m 90-95% certain this was even covered by Smith. The fact that the myth persists to this very day is, in my opinion, testament to the [joint] chicanery/gullibility of the human race.

James August 14, 2009 at 7:25 pm

Haven’t we sort of come to the conclusion as a world that you can’t grow the pie if you don’t allow people to keep what they grow?

Anonymous August 15, 2009 at 5:15 pm

I’ve heard enough comments from leftists that derided GDP growth from the 1980s to present as meaningless because it’s not equitably distributed. My take on it is they’re Communists who don’t care how big the economy is.

Daniel Kuehn August 14, 2009 at 7:28 pm

As a general rule I think we have – but even supporters of the free market highlight certain exceptions. The point is being wrong about growth and not being interested in growth are two different things.

Whenever you address fundamentally political factions, like “communists”, you also inevitable have to ask “growth for whom?”

Anonymous August 15, 2009 at 5:18 pm

Well it’s true the Soviet Union and Communist China did grow their economies for a while, but under the most brutal conditions. When China finally wanted real sustainable growth making things the world really needed, they instituted capitalist reforms.

Daniel Kuehn August 14, 2009 at 7:36 pm

Playing the “who isn’t being civil” game is dicey. I could probably nominate a couple myself. Probably best to leave it to the discretion of the hosts.

Daniel Kuehn August 14, 2009 at 8:57 pm

this is the post:
http://cafehayek.com/2009/08/dam.html

Just do a word search on “Samuelson” and you’ll find the post – I won’t copy and paste it in the interest of space here.

Daniel Kuehn August 14, 2009 at 9:21 pm

What? No – I said I’m not defending protectionism.

Can’t a guy just enjoy the thrill of thinking over a problem?

If we’re taking the scope of human history, though, I’d probably defend something like the moderate tariffs in the early Republic. But I’d have to think about that before I commit.

sandre August 14, 2009 at 9:24 pm

Daniel says ( from the link )…”The New Deal, and especially war-time spending boosted aggregate demand and got us out of the wage-price spiral, but because of war-time rationing and diversion of manufacturing to war production, a lot of that aggregate demand remained “pent up”.”

Now, you have to explain why it took more than a decade for demand to “pent up”. After all it was probably the first time such experiment fiscal policy was tried in a modern economy. Whereas, all the previous recessions ( depressions as they were called prior to the great one ), ended without artificially “penting up” the demand.

Explain why it didn’t cause an unstoppable wage/price spiral in 1945- to 1960. You know that there was uptick in unemployment in 1946, right?

Like a true Keynesian, you are talking psychology, not economics.

You need to also explain why it was FDR who solved it in his first year rather than “do nothing” Roosevelt, given the spending patterns of the two presidents.

Fastest GDP growth, probably ever, happened during the war. During which time, most able bodied productive skilled men where recruited and sent overseas to destroy, get maimed etc, who where then replaced with unskilled teenagers are women. How can this be a model for growth? Please explain? This puts the whole credibility of such illusions as GDP as a measure of the economy.

I have a lot of pent up demand right now, but I am unable to demand anything, because I have nothing to demand it with.

Anonymous August 15, 2009 at 1:59 pm

Are you counting this one? Is it over yet?

The big question is S Andrews claim, “Whereas, all the previous recessions ( depressions as they were called prior to the great one ), ended without artificially “penting up” the demand.”

Sure they eventually ended.
Do the facts support doing nothing leads to shorter and less frequent recessions though?

Even the post-Reagan recession have ben supported by doing something rather then nothing. And the FDR factors ( FDIC, unemployment and social security are all still in place)

Anonymous August 14, 2009 at 9:29 pm

You said:
“We’ve had too much so why would you advocate more” is antithetical to critical thinking. Unless you can advocate for one actual law that we have on the books, then I think maybe you would agree that this position is the PRODUCT of critical thinking.
Poking theoritical holes in the idea can be provoking & useful, but at some point you’re just fiddling while Rome burns. If you can’t think of a single actual empirical piece of evidence to back up your critique, then I think you might be at that point. Sometimes the choice is between “OK, I’m staking out a position for now, which I am open to changing” and “I’m just going to mull over this from my ivory tower, here with my fiddle”.

Anonymous August 15, 2009 at 1:57 am

You don’t understand the basics of keyensianism. He doesn’t say you need constant government spending. Only when aggregate demand drops in the private sector during a recession fdoes he recommend “stimulus spending”.

And no you are wrong about previous recession. When we did nothing they were more prolonged and more frequent. Post FDR recessions were less frequent and shorter. Now post Reagan they are trending longer and more frequent.

Aggregate demand matters. Trickle down supply side economics is BS with no support in the facts or literature. Concentrating wealth and taking it away from the middle class concentrates power, slows the economy and results in boom and bust cycles.

Anonymous August 15, 2009 at 12:35 pm

I’m not even sure what you’re talking about. Let me give a try at answering, though:

I assume you mean “do nothing” Hoover, which is a misnomer on your part. Hoover did deficit spend, as did FDR. FDR did not get us out in the first year because both Roosevelt and Hoover’s deficits were relatively small compared to GDP. Granted, there were clues that it was at least doing some good – output dipped again after Roosevelt balanced the budget in 1937. It took the massive SPENDING of WWII to get us out, not the killing of WWII.

The pent up demand isn’t part of the Keynesian program at all – I’m not sure why you’re treating it like it is. The point is that the nature of war-time spending – the kinds of resources they needed to defeat fascism – required rationing (well – they thought they did – I’m not going to get into an argument right now over whether there could have been a free market “arsenal of democracy”). So the pent up demand from that completely unrelated rationing policy meant that American consumers all wanted to buy stuff at the war’s end. You’re not going to have a depression when that’s the case – when there’s something to step in and replace government spending.

It doesn’t surprise me that there was an uptick in unemployment in 1946. You have lots of service men and women coming home, lower European demand for US exports, massive industrial restructuring that’s going to cause some dislocations while it’s occuring. Wouldn’t you expect some unemployment??

Anonymous August 15, 2009 at 5:39 am
Anonymous August 15, 2009 at 5:49 am

You know, that is EXACTLY how I pictured him!

sandre August 15, 2009 at 6:50 am

Shabby says…”All the posters that despise unions should research “The Battle of Blair Mountain” to get an idea of what unrestrained capitalism is capable of.”

Is that so shabby? Especially, in the context of your other sentence…” Libertarianism has never been tested on a scale larger than Survivor; it has absolutely no track record, and never will.”

Anonymous August 15, 2009 at 7:06 am

It’s time for the list again:

MUIR(STU)PIDITY OF THE (muir) DUCK

All of these are stands alone stupidity. Context is not necessary to understand that the person who created these is mentally defective.
1. “The rising income discrepancy is what prevents people from obtaining affordable housing.”
Posted by: muirgeo Nov 2007

2. “If you are advocating a free market system say for schools you need to show one that works.”
Posted by: muirgeo | Mar 10, 2008 7:24:41 PM

3. “Suffice it to say individualism where ever it surfaces is ultimately self-destructive.”
Posted by: muirgeo | Mar 15, 2008 11:29:41 AM”

4. “Planning and tinkering will definitely have a place in creating a strong competitive market. The invisible hand……YOU’RE FIRED!!!… well or at least demoted.”
Posted by: muirgeo | Mar 17, 2008 9:13:45 AM

5. “Natural cycles will often effect(sic) conditions on a short term basis but will not effect the larger man made trends.”
Posted by: muirgeo | Mar 18, 2008 10:15:41 AM

6. “I honestly believe the principles I support would increase our liberty not decrease it.”
Posted by: muirgeo | Mar 18, 2008 6:57:16 PM

7. “5,000 year old vegetation has been found in multiple areas around the world in the paths of recently receding glaciers.”
Posted by: muirgeo | Mar 18, 2008 7:00:43 PM

8. “First , the idea of climates “natural course” is invalid. There’s no magic here climate responds to things we understand pretty well.”
Posted by: muirgeo | Mar 20, 2008 9:02:34 AM

9. “When some one says the climate is warming because it is following its natural course they need to be more specific. That’s all I’m saying. Is it warming from the Sun, El Nino…. what? And provide evidence.”
Vidyohs… your ego so controls you. You should learn how to tame it. You’ll be a happier person.
Posted by: muirgeo | Mar 20, 2008 10:28:10 AM”

10. “I compete with other doctors for my patients and market forces are somewhat in effect. A government single payor(sic) system could actually increase consumer choice and market competition.”
Posted by: muirgeo | Mar 21, 2008 9:10:06 PM
11. “ If I was(SIC) to summarize my position it would be that I believe we need more democracy not less ( ie. a government represents the needs of its people more then(SIC) of its economic institutions).
I believe in competitive markets but understand they work best with good regulation.
Posted by: muirgeo | Mar 26, 2008 12:56:01 PM

12. “Seriously, the only historical reference I can think of was back in the days of the feudal system. Then the markets were completely unencumbered. Property rights were strictly observed and all property was held by a minority of wealthy people with everyone else an indentured servant.”
Posted by: muirgeo | Mar 26, 2008 2:48:31 PM

13. “Poorly worded. Maybe qualifies for a murpidity but it’s a fact that there is no “natural state” of climate. Indeed it’s always changing.”
Posted by: muirgeo | Mar 28, 2008 1:30:17 PM

14. There will always be regulation. The key is to make it minimalist but effective. The biggest danger to effective regulation is allowing the regulated too near the process of making regulations and too near the process of enforcing them.
Posted by: muirgeo | Mar 31, 2008 1:41:01 PM

15. Hardworking people are whining because the fruit of their labor has been stolen by the financial wizadry of wall street paper pushing assholes making pyramid schemes and calling them fancy names like derivatives. That’s not free market economics it’s common thievery and it’s the end result of allowing unfettered greed run our markets and assuming beyond all reason that the invisible hand will slap these bad boys when they get out of line. – Muirgeo, March 27 2008

16. I’m no Jefferson but like he I’m as interested in maximizing liberty contrary to what you all claim. It’s a cheap shot when you claim force is being used to steal your liberty when in fact it is being used to spread liberty. Yes force for liberty! There is NO other way. I’m a pragmatist and a reductionist and THAT is what I suspect you all dislike of my post. You don’t get to tell us about your beautiful ideology with out telling me how it plays out in the real world as Karl Marx so aptly described. Posted by: muirgeo | Aug 16, 2008 1:26:52 AM

17. I’m not a libertarian. I’m a pragmatic promoter of liberty in the real world. My views would provide health care for all as part of the social contract that recognizes a right to life and health. We all recognize a right not to be attacked by a foreign invader and thus we impose a military cost to all. Why not also recognize a right to health care a lack of which has killed millions more then any foreign invader of our country. Posted by: muirgeo | Aug 16, 2008 3:45:53 AM
Or (muriduck’s answer to muirpidity #1)

18. It’s called Gentrification. It’s a well described social economic / market phenomenon.
” Rising housing costs in gentrifying districts may ensure that poor residents who do move leave the neighborhood, rather than settle elsewhere in it. Since their places usually are taken by more affluent, better educated people, the neighborhood’s character and demographics change.”
gen•tri•fi•ca•tion
Pronunciation:
ˌjen-trə-fə-ˈkā-shən
Function:
noun
Date:
1964
: the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents

19. I’m pro-democracy. Not a socialist or a communist by any definition. Posted by: muirgeo | Aug 18, 2008 8:46:04 PM

20. Now, I have to be honest. Like the Founding Fathers I fear even legally gotten massive accumulations of wealth. I struggle with this but my guess is even when the means to wealth is set on an even playing field we might all, at the start of the game have to agree that those of us through luck and hard work fortunate enough to prosper disproportionately will have to pay back disproportionately to the system that allowed us to succeed. Likely it doesn’t have to be a massively progressive tax structure but I’m pretty sure it can’t be done with out some progressively.
Posted by: muirgeo | Aug 23, 2008 12:37:37 PM

21. Maybe because before the law existed and Wall Street did what it wanted we had a GREAT FRICKING DEPRESSION! That was no fun. Wall Street then as now proved free-markets a bogus dangerous concept.
Posted by: muirgeo | Sep 9, 2008 10:24:08 AM

#22. “Seperation of church and state…separation of money and state
Posted by: muirgeo | Sep 10, 2008 2:22:21 PM”

#23. “Having tasted this easy way of living the people wanted more and ever more.”
Posted by: vidyohs
YEP! And that’s why you will never get rid of the welfare state so the best you can do is to optimize it’s efficiency… like FDR, Kennedy or Johnson or Clinton did.
Posted by: muirgeo | Sep 11, 2008 10:29:56 AM

#24. The market won’t bring these changes on its own since the Invisible Hand has shown itself to have no eyes to plan for what is ahead of it. The idea that we should go blindly into the future is what lemmings do ( I saw them in the Arctic) it’s not what evolved intelligent social beings do. Our ability to plan the future is what has raised us above all the beast. To deny that is to wish a return to living like beast.Posted by: muirgeo | Sep 20, 2008 5:55:38 PM

#25. “It may have been Vidyohs that made the statement some time ago that the country should be split into two: one for those that value personal responsibility and freedom and the other for those that want to live their lives in a nanny state where big brother does the thinking and guides the Stepford citizenry through life.
Posted by: Babinich
I’m all for that. I sometimes wish we’d have just let the southern successionist have their way. Of course it’d just be another border problem issue with all those rednecks wanting to come work in our productive economy. Posted by: muirgeo | Sep 28, 2008 3:09:20 AM”

#26. (In reference to FDR) And he wasn’t packing the court he was unpacking the court. You need to review the history a little more. Posted by: muirgeo | Sep 27, 2008 7:47:03 PM

#27. “I’m not in favor of totalitarian health care. I favor single payor (basically Medicare for everyone). One of the big reasons IS because it would increase competition making doctors able to return to small practice only having to compete mano to mano with other doctors.
Posted by: muirgeo | Oct 2, 2008 1:59:44 AM”

#28. “Answering my own question I would not pick this country as my random chance of being born into poverty would be greater then many and the chance for upward mobility would be far less then in other countries. So yeah I’m a patriot but it’s not because I think this is the best country but because I believe it can be.
Posted by: muirgeo | Oct 14, 2008 3:09:05 PM”
#34. “So do you honestly think social status at birth is NOT the most significant factor in determining ones success?
First most progressives are just as likely to be hard working tax paying and wealthy citizens as conservatives. But we realize much of our success was a coincidence of birth. Where as people like yourself must believe that you have both superior genes and greater intestinal fortitude as the reason for your “success”. Again as if those also weren’t exclusively the product of chance.
But you don’t give a crap because you think success is a Darwinistic thing based on inheritance alone. And yes I’m somewhat proselytizing because I really have no idea on what basis you believe the things you do… but I’m pretty certain it’s not based on an objective rational evaluation of real world factors. Just the simple-minded idea that merit is always best metered out when the rules are most minimal. WHATEVER!
Posted by: muirgeo | Jun 20, 2009 3:33:07 PM”

I’m missing 29-33, and I believe the List is up to 36 now. But it’s still a useful illustration as to the genius of Ducktor Yasafi.

Anonymous August 15, 2009 at 8:59 am

So what’s your point? Do you disagree?

Anonymous August 15, 2009 at 1:25 pm

Ah yes – the perennial mistake of assuming libertarianism = capitalism.

I think schwabby is gently making a point about some very, very real dynamics on this blog that are immensely obvious to people that sometimes don’t agree with the posts, and it would be good to take it to heart.

Daniel Kuehn August 15, 2009 at 12:19 pm

True – and I’ve raised that point on imbalances too. But USUALLY their concern about imbalances has nothing to do with what you’ve mentioned – making the Chinese more competitive. It has more to do with the risk of currency crises. And every once in a while when an economist joins the throng of journalists who are concerned about “losing our industrial base” – it’s a normative position they’re expressing in solidarity with labor or as a matter of national pride, or simply an aesthetic/nostalgic/romanitc reaction. And that’s fine – I have some degree of sympathy with labor, and I consider myself proud of America – but I don’t pretend that the competitiveness concerns are grounded in positive economic analysis.

Granted – I’m relatively concerned about growing Chinese competitiveness in certain industries – but the point is the trade deficit is a symptom of that, not a cause.

Anonymous August 15, 2009 at 12:48 pm

So I’m relenting a little bit after reading your post below. I still don’t think the imbalances are bad because they’re taking our money and investing it in their own infrastructure. Obviously they’re going to be investing a portion of it in their own infrastructure, but for the most part they’re not.

However – this isn’t a normal trade relationship, and the yuan is deliberately undervalued – and that wave of Asian savings contributed to the credit bubble here. That’s another major concern. But I don’t think that’s a problem with running trade deficits – that’s just a problem with the way in which this particular deficit arose.

Anonymous August 15, 2009 at 12:44 pm

That’s actually wrong about Reagan: http://wwwdev.nber.org/cycles/cyclesmain.html

Post-Reagan they’ve been shorter and less frequent (at least less frequent than the post-war average), present depression excluded.

Anonymous August 15, 2009 at 1:02 pm

OK – first we were talking about regulation, then you asked about protectionism (which this post was originally about), and now you’re talking about our regulation discussion again.

I’m not a regulatory expert, so I couldn’t give you details, but I think some regulations on leveraging ratios could be appropriate. I have no idea what you would do – but something to ensure that securitization and derivatives don’t prevent banks from adequately evaluating credit risks (maybe it’s just a required documentation regulation – I don’t know). For all I know we should reinstate Glass-Steagall. I’m not sure if we should – there are people out there that know better than I do – but securitization by GSE’s seemed to be going smoothly for decades. Securitization by private firms got out of hand and unstable very quickly – and right after Glass-Steagal was repealed. Maybe it needs another look, but I’m really not qualified to say.

So THAT’S my regulation answer. As for “fiddling while Rome burns”, New Trade Theory, and protectionism: New Trade Theory may not be a good justification for protectionism by the U.S., but the world is much bigger than the U.S.. It gives very good reason to think about why developing nations might want to consider some moderate tariffs as a growth strategy. So it’s not an impractical theory – it’s just not something that speaks to decisions being made in the U.S.

Anonymous August 15, 2009 at 3:57 pm

It’s funny that you chose bank leverage & securitization, since that problem is entirely the result of government interference. Securitization was a governmental policy, through the GSE’s. Look at real estate lending outside the residential area, where it isn’t manipulated so much by the government. The products available & their treatment by the banks are very different than they are in residential lending, and we haven’t seen the problems there that we did in residential. The major difference between those markets is that the government isn’t pulling a bunch of strings to get commercial real estate developers to leverage themselves 100% to bet their entire financial position on one property.
As for leveraging ratios, you could have banks simply fund a minimum portion of thelr assets with subordinated bonds & you could eliminate hundreds of pages of rules about ratios, investment ratings, etc., and it would be more effective. Arnold Kling explains how almost all this nonsense was a response to regulation. These financial run-around positions would never had been necessary without the convoluted regulatory context.

sandre August 15, 2009 at 3:58 pm

Daniel says…”FDR did not get us out in the first year because both Roosevelt and Hoover’s deficits were relatively small compared to GDP.

This is what keynesian economists have told us: FDR got us out of depression, then he had this unfortunate fascination controlling the deficit, which caused a second dip. In 1933, FDR was still running the last hoover budget – fiscal 1934. First FDR budget was fiscal 1935 and it was lower than 1934 budget. and two years later we had a sudden explosion in unemployment because FDR cut back again – by a teeny bit, none the less.

You also, failed to address this point -“Fastest GDP growth, probably ever, happened during the war. During which time, most able bodied productive skilled men where recruited and sent overseas to destroy, get maimed etc, who where then replaced with unskilled teenagers and women. How can this be a model for growth? Please explain? This puts the whole credibility of such illusions as GDP as a measure of the economy.” which in turn puts whole methodology of this aggregatge into question. Based on these GDP aggregates, the war years had seen the fastest growth in prosperity. In your own words, there was no such thing – depression continued – there were shortages and rationing.

“The pent up demand isn’t part of the Keynesian program at all – I’m not sure why you’re treating it like it is.” Who cares whose program it is, so long as it is part of regular dive that keynesians take into psychbabble, which often happens when they can’t explain economic phenomena.

Danny says again “You’re not going to have a depression when that’s the case – when there’s something to step in and replace government spending.

It doesn’t surprise me that there was an uptick in unemployment in 1946. You have lots of service men and women coming home, lower European demand for US exports, massive industrial restructuring that’s going to cause some dislocations while it’s occuring.”

That’s hardly an explanation for – why the unemployment in 1946 didn’t cause a wage/price spiral – not even as a standard keynesian dive into some sort of psychobabble. You are either didn’t understand my question, or was just trying to beat around the bush. Question is not whether one would expect unemployment, but why it didn’t turn into a “wage/price spiral”. We are talking about a 66% decline in government spending ( which means spending has to go up over 200% to return to the previous all time high ) in the middle of a “GDP” recession.

sandre August 15, 2009 at 4:06 pm

So why are you surprised? Have you ever been to a socialist blog? Have you been to delong’s blog?

On this blog, Don Boudreaux and Russ Roberts are such secure gentlemen that they allow dissenting posts – there is no one censoring anyone’s comments.

I am amazed at one guy who has an obsession with this blog, when he has never ever agreed once on this blog on any economic matter. Not even when explicitly asked to tell us his areas of agreement.

No one needs to point to the obvious. We don’t need anyone’s advise on this matter.

Anonymous August 15, 2009 at 4:11 pm

Well, like I said I’m not an expert on financial regulation. If a subordinated bond minimum will work better than a leverage ratio restriction then so be it. I’m not particularly invested in one over the other – my point is simply that natural market forces can drive bad investments, and it’s not inconceivable to consider some regulatory solution – whether it’s Kling’s solution or someone elses.

As for the GSE’s and securitization you’ll have to explain that one a little more. Again, I don’t know the history in great detail but my understanding was that GSE’s had been securitizing assets since the 70s and have had no problems with it. For some reason, private firms haven’t been able handle it when it grew as a strategy in the last decade or so.

sandre August 15, 2009 at 4:11 pm

Alan Greenspan certail WAS one of us, when was an Ayn Randian ( I am not an objectivist ). I can’t say anything about the whole GMU crowd, but as a person with sympathies to the austrian school, I can say this – Austrians are humble to admit, that, it’s difficult to know for one person or a small group, what is happening, what should happen, what would happen, or what to do, to the extent that they humbly reject any attempts by small coterie of people to centrally plan our lives – instead – they advocate leaving all transactions to voluntary exchanges.

Anonymous August 15, 2009 at 5:52 pm

I’m not surprised at anything – I’m not sure what you mean, I don’t think I’ve ever been to a socialist blog, I do read DeLong’s blog, and I’m very appreciative of the hosts here.

I’m not sure if muirgeo has agreed with anything or not – I wasn’t really responding to schwabby’s comments on muirgeo – just to the sometimes insular behavior in the comment section of Cafe Hayek. I’m one of the “we” you’re talking about and I appreciate the advice.

Anonymous August 15, 2009 at 6:51 pm

Haha – is that a reference to me? No – I think we can just think about what regulations are meaningfully burdensome. You don’t have to have a measure for everything. That doesn’t make the few existing measures good.

Anonymous August 15, 2009 at 9:17 pm

Sure there are other factors like tax cuts for the rich, free trade, lower interest rates, jobs overseas, not enforcing the Sherman Antitrust Act, a Fed Chairman who was a Libertarian…. on and on all of which are policies that benefit corporations over people.

New regulations did not get us here. Policy changes that favor accumulated wealth and power DID.

Sam Grove August 15, 2009 at 10:07 pm

This is how you earned YASAFI.

There have never been any policy changes that have negatively affected incumbent wealth.

And Alan Greenspan was not a libertarian.
He was part of the Ayn Rand circle for a time and she hated libertarians.

All your favorite straw men are to blame, it seems.
No objective analysis here.

sandre August 16, 2009 at 1:42 am

ROTFLMAO. It’s not whether we need to measure everything, but this psychic belief that everything can be measured and future can be predicted with a large degree of accuracy, which find silly. It is easy for an empiricist to take the easy route of suggesting that we don’t have to measure everything.

Anonymous August 16, 2009 at 2:22 am

Are you BUI – blogging under the influence? What are you talking about? How exactly would you propose measuring regulatory burden?

I’m not sure who here has said that everything can be measured and the future can be predicted with a large degree of accuracy. And I’m not sure why it’s the “easy route” to recognize the limits of what we’re able to measure easily.

That doesn’t mean you can’t talk intelligently about a subject.

Anonymous August 16, 2009 at 2:27 am

He called himself one.

I saw him a couple months ago on Connecticut Ave., the day of his Congressional testimony where he admitted he messed up. In retrospect, I should have yelled something at him or at least said hi, but I was a little star-struck. Not every day you see someone like that.

Sam Grove August 16, 2009 at 3:39 am

As certain as you can be of anything, you can be certain that a REAL libertarian would never be appointed as chairman of the FED.

Anonymous August 16, 2009 at 11:43 am

I think we’re garbling up objectivism, the Austrian school, and libertarianism. I can see why an Austrian or an objectivist could never serve on the Fed. I don’t see why a libertarian couldn’t. Milton Friedman was another self-identified libertarian (but not Austrian or objectivist), and he certainly had no problem with the Fed.

Anonymous August 16, 2009 at 11:56 am

RE: “Based on these GDP aggregates, the war years had seen the fastest growth in prosperity. In your own words, there was no such thing – depression continued – there were shortages and rationing. ”

You have my argument exactly backwards, S Andrews. Go back and reread it. Of course during the war years the GDP growth was the strongest because it was during the war years that deficit spending reached unprecedented peaks. What FDR and Hoover did before the war spending was child’s play and didn’t get us out of the slump. The war spending vindicates Keynesianism. Now, because of the NATURE of war spending and it’s reliance on rationing, there was no shortage of aggregate demand afterwards (as Samuelson feared there would be).

RE: “Who cares whose program it is, so long as it is part of regular dive that keynesians take into psychbabble, which often happens when they can’t explain economic phenomena”

I’m not sure what you’re even trying to say here. All I was saying was that Keynesian fiscal policy doesn’t necessitate rationing. It just happened during the war because of the conditions of the war.

RE: “Question is not whether one would expect unemployment, but why it didn’t turn into a “wage/price spiral”.”

Inflation was up – how could their be a wage-price spiral if aggregate demand was strong despite the government pull-back (for reasons I mentioned above), and inflation is up. What possible factor could push us into a wage-price spiral?

Maybe you just misunderstood my answer: there is good reason to expect some unemployment – but they’re all reasons for frictional unemployment, not structural unemployment.

Sam Grove August 16, 2009 at 5:09 pm

Friedman became more libertarian in later years, but when I asked him to sign a petition at an LP convention in San Francisco in the late ’80s, he refused to sign it because he didn’t wish to be associated with the Libertarian Party.

I don’t know why objectivists would object to the FED.

I didn’t say a libertarian couldn’t serve on the FED, I said you can be certain one would never be appointed to the FED.

Lots of people have called themselves libertarian. Even Bill Clinton once suggested that he was libertarian. So has Bill Maher.

So how does one tell if a person actually is libertarian?

Having identified myself as libertarian since 1980, I do have some qualification on the subject.

mesaeconoguy August 16, 2009 at 6:54 pm

You regularly make incorrect statements, backpedal, and generally do not know what you are talking about (see above).

I’m continually amused by your stupidity, but you have grown tiresome.

Anonymous August 16, 2009 at 6:59 pm

I’d really appreciate it if you’d stop calling me stupid. Nobody is treating you like that.

Exactly what have I been incorrect on and what have a backpedaled on? That I don’t buy your measure of regulatory burden? An appropriate response might be to justify WHY it’s a good measure, rather than calling me stupid. It’s like people who use number of patents as a measure for innovation. It doesn’t work. There’s absolutely no effort to engage the qualitative differences between regulations.

Further – it promotes the inaccurate idea that people who seriously consider regulatory options think that any regulation is a good regulation. Nobody is promoting that idea.

mesaeconoguy August 16, 2009 at 7:08 pm

1. I don’t care what you think,

2. I’m quite sure you would appreciate it were I to stop calling you stupid,

3. Making stupid statements makes you look, well, stupid.

Have a wonderful day.

Anonymous August 16, 2009 at 7:12 pm

It’s really not getting through to you that just calling people that disagree with you stupid, WITHOUT engaging their actual disagreements at all doesn’t really say much about you and it doesn’t really do much for either of us.

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